The Securities and Exchange Commission (SEC) has informed all stakeholders that as part of efforts to ensure investor protection while encouraging innovation in the conduct of securities business, the rules governing Crowdfunding business in Nigeria came into effect on January 21, 2021.
Crowdfunding is the process of raising funds to finance a project or business from the public through an online platform, which could be a website, portal, intermediary portal, application, or other similar modules that facilitate interaction between fundraisers and the investing public.
The funding occurs within a period known as funding round, within which a specific project, business, or venture is hosted on a crowdfunding platform to raise funds from a large number of people in exchange for shares, debt securities or other investment instruments approved by the commission.
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The funds may either be pooled from high net worth investors, or a large number of people through an online platform in exchange for any investment instruments approved by the commission, which can also be plain vanilla bonds or debentures, and simple contracts.
SEC noted that in line with the transitional provisions of the Rules on crowdfunding, all persons/entities operating an investment crowdfunding portal/digital commodities investment platform, prior to the commencement of the rules were expected to restructure all operations in accordance with the requirements of the rules and apply for registration not later than 90 days from the Effective Date.
While the transitional period elapsed on April 21, 2021, the Commission has directed all existing investment crowdfunding portals/digital commodities investment platforms to note the requirements and eligibility criteria for raising funds through and/or operating a Crowdfunding Portal and comply with the registration requirements or cease operations by June 30, 2021, failing which the operations of such platform would be categorized as illegal and attract regulatory sanction as stipulated in the Rules.
