In March 2025, President Bola Tinubu signed the Investments and Securities Act 2025 (“ISA” or the “Act”) into law. The Act repeals the Investments and Securities Act 2007 and reaffirms the Securities and Exchange Commission (“SEC” or the “Commission”) as the sole regulator of the Nigerian capital market. Under this mandate, the SEC is responsible for promoting capital formation, protecting investors, maintaining a fair, efficient, and transparent market, and mitigating systemic risk.

The ISA introduces substantial reforms to address emerging challenges within the Nigerian capital market while reinforcing core principles of corporate governance such as fairness, accountability, transparency, and responsibility. Key corporate governance provisions include:

1. Enhanced powers of the commission: Section 3 (4) (b-c)

>A key innovation of the Act is the expansion of the authority vested in SEC over the governance of public companies. The Commission is now empowered to appoint interim or independent directors to the board of companies subject to its intervention or regulatory action. In addition, SEC may place directors on probation for a period deemed reasonable in accordance with regulations made under the Act. These provisions underscore SEC’s commitment to strengthening corporate governance structures, boosting investor confidence, and ensuring market integrity.

2. Expansion of eligible issuers for public offerings: Section 95 (1) (a-f)

The ISA broadens the definition of entities recognized as issuers. Beyond public companies and statutory banks listed under the repealed Act, the new provisions now include, collective investment schemes, entities operating within free trade zones, and government agencies.

3. Approval of Corporate Restructuring by Public Companies: Section 140

The ISA empowers the Commission to oversee and approve restructuring activities undertaken by public companies. This includes significant changes such as conversions, carve-outs, spin-offs, and major asset acquisitions or disposals that could materially impact the company’s strategic direction.

4. Mandatory internal controls for public companies: Section 89

The Act mandates all public companies to establish and maintain a comprehensive system of internal controls covering financial reporting and asset security. The board of directors is responsible for overseeing and ensuring the effectiveness of the company’s internal control and must report on the effectiveness of the internal control in its annual report. A public company that contravenes this provision shall be liable to a penalty of not less than ₦5,000,000 and a further penalty of ₦50,000 per day for every day the violation continues.

5. Treatment of unclaimed dividends of public companies: Section 93

The management of unclaimed dividends is now subject to strict regulation under the Act. Any person found in contravention of the relevant provisions or accompanying regulations commits an offence and is liable on conviction to a fine of not less than ₦10,000,000 or at least five years imprisonment, or both. In lieu of prosecution, SEC may impose a penalty of not less than ₦10,000,000 and ₦50,000 daily for continued violation.

6. Auditor's duty to disclose irregularity or undesirable practice: Section 183

Auditors are legally obligated to report any irregularities or undesirable practices in the administration of a scheme to the manager or trustee if such matters come to their attention in the course of carrying out their audit responsibilities. A copy of such report must be submitted to the Commission within 10 working days, where there is a reasonable cause to believe the report might be of material significance to the Commission. Failure to report such irregularities by an Auditor will attract a minimum penalty of ₦5,000,000.

7. Virtual and digital asset recognition: Section 357

The ISA recognizes virtual and digital assets as securities. This designation requires businesses involved in digital assets to register with the SEC and comply with applicable regulatory guidelines. The move aims to strengthen oversight, reduce fraud in the digital space, and build greater confidence in blockchain-based innovations.

8. Prohibition of payment for loss of office to a director: Section 146

Section 146 of the ISA prohibits payment for loss of office to a director of a company in connection with a transfer of shares in the company, or in a subsidiary of the company, resulting from a merger, takeover or other form of corporate restructuring unless the payment has been approved by a resolution of the relevant shareholders. This ensures that directors are not unduly compensated at the expense of shareholders during major corporate transitions.

9. Issuance of debt securities by body corporate and supranational bodies: Section 308 - 311

Entities including local or foreign companies, supranational organisations, and other approved entities are prohibited from issuing debt securities to the public without the prior review and approval of SEC. Further, no entity in default of payment obligations for more than one month may issue additional debt securities. Mismanagement or diversion of proceeds from such issuances constitutes a criminal offence, punishable by up to 15 years imprisonment. Alternatively, the SEC may require restitution and impose a civil penalty of up to 500% of the mismanaged amount.

Conclusion

The Investments and Securities Act, 2025, marks a transformative milestone in Nigeria’s capital market regulation. It codifies stronger governance standards, enhances the SEC’s oversight capabilities, and introduces stringent accountability mechanisms. By mandating improved internal controls, expanding compliance obligations, and affirming investor protections, the Act paves the way for a more resilient and transparent investment environment. Ultimately, these reforms are poised to boost investor confidence and sustain long-term growth within the Nigerian capital market.

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