A COMPARATIVE ANALYSIS OF THE INVESTMENT AND SECURITIES ACT, 2007 AND THE INVESTMENT AND SECURITIES ACT, 2025

INTRODUCTION

On March 29, 2025, President Bola Ahmed Tinubu signed the Investment and Securities Act 2025 (the “ISA 2025” / the “Act”) into law, marking a significant milestone in the reform and regulation of Nigeria’s capital market.

The ISA 2025 repeals the erstwhile Investments and Securities Act, No. 29 of 2007(“ISA 2007”/ “the repealed Act”), introducing a new regime of legal framework comprising 18 (eighteen) parts. It introduces key innovations aimed at enhancing investor protection, improve market transparency and foster sustainable growth.[1]

In this piece, we provide an extensive review of these key innovations introduced under the ISA 2025.

PART I– ESTABLISHMENT, OBJECTIVES, FUNCTION, AND POWERS OF THE SECURITIES AND EXCHANGE COMMISSION

The Act establishes the Securities and Exchange Commission (“SEC”/the “Commission”) as a body corporate with perpetual succession, a common seal, and the capacity to sue and be sued in its corporate name. The Commission is constituted as an autonomous regulatory agency, with its principal office situated in the Federal Capital Territory of Nigeria and empowered to establish zonal offices across the federation[2].

Pursuant to Section 3 of the Act, the SEC is re-affirmed as the apex regulatory authority for the Nigerian capital market, mandated to regulate, develop, and maintain a fair, transparent, and efficient capital market that inspires investor confidence and facilitates capital formation. The Act introduces ancillary and incidental objectives which reinforce the Commission’s overarching regulatory and developmental functions.

In line with contemporary global standards particularly those of the International Organization of Securities Commissions (IOSCO), the Act considerably expands the Commission’s regulatory purview and confers upon it broader statutory powers surpassing those previously contained in the repealed ISA, 2007.

PART II– ESTABLISHMENT OF THE GOVERNING BOARD OF THE COMMISSION

The Act constitutes a Governing Board charged with the general policy direction and oversight of the affairs of the Commission[3]. The Board is bound by a statutory code of ethics and comprises individuals of impeccable integrity and competence. In addition to the previous composition under the repealed Act, the ISA 2025 introduces the following enhancements:

• Inclusion of a representative from the National Pension Commission (PenCom) of at least Director cadre.
• Of the three full-time Commissioners, one must be a legal practitioner with no less than twelve (12) years post-call experience.
• Of the two part-time Commissioners, both must possess demonstrable knowledge of capital market matters, and at least one must also be a lawyer with not less than twelve (12) years post-call experience[4].

Appointments into the Board are to be made by the President of the Federal Republic of Nigeria, with the Director-General and full-time Commissioners subject to Senate confirmation. The Board’s statutory responsibilities include, inter alia, formulating policies for the development of the capital market, approving major administrative and operational policies, and ensuring compliance with statutory mandates[5].

PART III– STAFF OF THE COMMISSION

Though captioned as relating to “Staff of the Commission,” this Part primarily provides for the appointment and functions of the Secretary of the Commission[6]. Unlike the repealed Act, the ISA 2025 is silent and makes no provision for appointment of other staff by the Commission. Given staff’s key role in the proper functioning of the Commission, it is our view that this omission is inadvertent. This view is supported by Section 16(1) of the ISA 2025 which makes provision for pension and other retirement benefits as prescribed by law for every staff of the Commission.

PART IV– FINANCIAL PROVISIONS

This Part contains provisions similar to those in Part IV of the repealed Act, addressing financial matters such as the Fund of the Commission and its application, Reserve Account, Power of the Commission to accept gifts, Penalties and fees to be retained and utilised by the Commission, Borrowing and Investments by the Commission, Annual estimates, Account and Audit as well as the Commission’s Annual Report.

While the repealed Act used the term “may” regarding the purposes for which the proceeds of the Fund of the Commission could be applied, the ISA 2025 now makes it mandatory for the Fund to be applied towards meeting the cost of administration of the Commission, payment of salaries, fees allowances, pensions, gratuities or other remuneration payable to the staff and members of the Board of the Commission amongst others[7].

Notably, the ISA 2025 also authorizes the application of the Commission’s Fund towards propagating capital market literacy in Nigeria.

PART V-REGISTRATION AND REGULATION OF SECURITIES EXCHANGES, FINANCIAL MARKET INFRASTRUCTURES AND OTHER SELF REGULATORY ORGANISATIONS

The Act prohibits any person from establishing or operating a securities exchange unless such a person has been registered with the Commission in accordance with the provisions of the Act and regulations made under it. This Part introduces severe sanctions including civil and criminal penalties for any person who establishes or operates a securities exchange without prior approval by the Commission[8].

Part V also introduces significant structural and definitional reforms to the registration and regulation of Securities Exchanges, Financial Market Infrastructures (FMIs), and Self Regulatory Organizations. Key innovations include:

1.    Securities Exchange Classifications: Exchanges may now be registered as either[9]:

·       Composite Securities Exchanges – authorized to list and trade a wide spectrum of securities, commodities, and financial products.

·       Non-Composite Securities Exchanges – limited to specific categories of securities or asset classes.

2.    Financial Market Infrastructure (FMI): The Act expressly recognizes and regulates FMIs such as Central Counterparties (CCPs), Trade Repositories, and Clearing Houses, thereby reinforcing systemic stability and transparency in post-trade processes.

3.    Importantly, transactions conducted through FMIs are exempt from the application of general insolvency rules. This regulatory carve-out is intended to insulate critical market operations from systemic disruptions that may arise from insolvency proceedings involving a participant or counterparty[10].

PART VI – REGISTRATION AND REGULATION OF CAPITAL MARKET OPERATORS

This Part places  emphasis on the role and obligations of Capital Market Operators (CMOs), and provides clearer conditions for registration, including requirements for “fit and proper” persons, institutional structure, and financial capacity.

The ISA 2025 mandates CMOs to keep a Register of Securities in the prescribed form, of the securities in which they have an interest, introduces elaborate provisions on revocation of registration and imposes strict liability on CMOs for non-compliance.

It also includes updated penalties, broader SEC oversight, and compliance obligations. In contrast, the repealed Act was narrower in scope and less detailed regarding the revocation of registration and ongoing obligations of CMOs.

PART VII – INSPECTIONS AND INVESTIGATIONS

The Act enhances the inspection powers of the SEC, allowing for both scheduled and unscheduled inspections. It introduces provisions for the appointment of investigators and audit trail maintenance.

The Act also clarifies procedures for cooperation with other regulatory agencies and international bodies and includes penalties for obstruction of investigations. The repealed Act was less expansive on investigative processes and lacked comprehensive provisions on inter-agency collaboration and digital evidence.

PART VIII – MANAGEMENT OF SYSTEMIC RISK

This part is a new introduction in the ISA 2025. It establishes a framework for monitoring and managing systemic risk within the Nigerian capital market.

Key provisions include the power of the Commission to designate systemically important participants, impose enhanced supervision, and coordinate with other financial regulatory authorities for the purpose of monitoring, mitigating and managing systemic risk in the capital market or contributing towards financial stability. This reflects global post-financial crisis reforms and the need to proactively address market-wide vulnerabilities.

PART IX – REGULATION OF SECURITIES

The ISA 2025 modernizes the rules on the issuance and allotment of securities. It introduces stronger civil and criminal liability for misstatements in prospectuses and mandates the holding of application monies in trust. Specifically in Section 114 of the Act, it is provided that the Director or any officer who authorized the statement has committed an offence and is liable upon conviction to pay a fine of not less than N1,000,000,000 (One Billion Naira) or imprisonment for a term not less than three years or both.

Other changes include:

·       Clearer allotment rules and penalties for breach.

·       Stricter rules for rescission rights where there are misleading disclosures.

·       New sections on systemic safeguards for issuers, including trust accounts and priority claims in the event of liquidation.

The repealed Act had basic provisions on disclosures and allotments but lacked detailed enforcement and investor protection clauses now seen in the ISA 2025.

PART X- CONDUCT OF SECURITIES BUSINESS

Key innovations introduced under this Part include:

1.    Absolute Bar on Cash Transactions in the Capital Market: In a bid to enhance regulatory oversight and promote investor protection and market integrity, the ISA 2025 completely bars engagement in cash transactions in the capital market^[11]. This provision reflects Nigeria’s desire to align its capital market with global best practices in financial regulation and enhance traceability in all dealings within the market.

2.    Mandatory use of Legal Entity Identifier for Capital Market transactions: The ISA 2025 mandates the use of a Legal Entity Identifier (LEI) by any participant in capital market transactions. This stipulation is designed to monitor and minimise systemic risks, arising from parties’ and counterparties’ activities^[12].

Participants in securities transactions are required to obtain the LEI from an authorised issuer and disclose it in every securities transaction they engage in, to ensure the accuracy of financial data and support effective risk management^[13].

PART XI- TRADING IN SECURITIES

The ISA 2025 has introduced stricter measures against insider trading by prohibiting a person in a relationship with an issuer who has knowledge of a material fact of the issuer that has not been publicly disclosed—from informing, recommending or encouraging another person to purchase or sell securities of the issuer^[14]. The Act makes it mandatory for any person who becomes an insider in a public company or any other issuer (other than a collective investment scheme) to, within 14 days of becoming an insider or of carrying out an insider transaction, file a report disclosing any direct or indirect beneficial ownership, or control, or direction over securities of the public company^[15].

The Act confers discretionary power on the Commission to initiate criminal prosecution against any person who violates any provisions of the Act relating to insider training or impose penalty of not less than N20,000,000.00 (Twenty Million Naira) or four times the profit gained, or loss avoided in the transaction whichever is higher in lieu of criminal prosecution.

Furthermore, the Act provides adequate protection for employees who volunteer information regarding insider dealings to the Commission, a self-regulatory organisation, or a law enforcement agency. All forms of retaliation such as termination or threats of termination, suspension or other disciplinary action against an employee who reports an insider dealing are prohibited. An erring employer may be liable for a final and binding settlement by arbitration under a collective agreement, in a complaint to the Commission or in an action before a Court.

PART XII- MERGERS, TAKE-OVERS, AND CORPORATE RESTRUCTURING

Revised corporate restructuring rules: Until the enactment of the Federal Competition and Consumer Protection Act, 2018 (FCCPA), the Commission had regulatory oversight over the restructuring of all companies. However, following the FCCPA which empowers the Federal Competition and Consumer Protection Commission with regulatory powers over corporate mergers, the ISA 2025 limits the Commission’s regulatory powers over mergers to only public and listed companies^[16].

Additionally, the Act mandatorily requires a person intending to acquire shares carrying 30% or more of the voting rights of a company, whether alone or in concert with another person, to obtain prior approval from the Commission before proceeding with a takeover bid^[17]—and to also make a take-over bid to all other shareholders of the company^[18].

Prohibition of misappropriation of clients’ funds in a Collective Investment Scheme: In a move aimed at boosting investor confidence in the capital market, the ISA 2025 expressly prohibits managers, trustees or custodians from misappropriating funds or securities of a client. A manager, trustee or custodian is also prohibited from withholding, refusing, neglecting, or otherwise failing to remit the proceeds of sale of a client’s securities^[19].

A person who contravenes this provision of the Act commits an offence and is liable on conviction to a fine of not less than N50,000,000.00 (Fifty Million Naira) only and restitution to the client with interest at the prevailing commercial bank rate.

PART XIII- COLLECTIVE INVESTMENT SCHEMES

In a move to curb the growing rise of Ponzi and Pyramid schemes, the ISA 2025 introduced provisions granting the Commission power to enter and seal up all prohibited schemes and to approach the Court for the purpose of obtaining an order to freeze and forfeit all assets of such schemes to the Federal Government of Nigeria^[20].

The Act defines a prohibited scheme as an investment scheme that pays existing contributors with funds collected from new contributors to the scheme promising high returns with little or no risk or any scheme where participants attempt to make money by recruiting new participants where no genuine product or service is actually sold, the primary emphasis is on recruiting new participants, the product or service is not registered or the promoters or marketers are not licensed or registered^[21].

In addition to other measures which the Commission may take against any prohibited scheme, the Act prescribes a fine of not less than N20,000,000.00 (Twenty Million Naira) or imprisonment to a term of 10 years or both for promoters and operators of any entity engaged in a prohibited scheme.

PART XIV – INVESTOR PROTECTION FUND

The ISA 2025 retains the requirement for securities exchanges and capital trade points to maintain an Investor Protection Fund (IPF)^[22], aimed at compensating investors who suffer financial loss due to the negligence, insolvency, or defalcation of dealing member firms^[23]. However, the new Act also introduces several innovations. It specifies that the Board of Trustees managing the IPF shall consist of up to nine (9) members drawn from various capital market stakeholders, including representatives of the SEC, CSCS, investor groups, and capital market operators^[24]. This multi-stakeholder representation enhances inclusivity and accountability.

A notable change is the reduction of trustee tenure from(4) four to (3)three years^[25], with the option of a six-month temporary extension^[26]. The sources of funding for the IPF have also been clarified and expanded to include insurance proceeds, recoveries, and pre-existing IPF balances. Most significantly, the ISA 2025 introduces structured claim verification procedures, with defined timelines—90 days for verification and 14 days for payment^[27]—providing clarity and efficiency in the compensation process.

PART XV – COMMODITIES EXCHANGE AND WAREHOUSE RECEIPTS

A major innovation in ISA 2025 is the introduction of a comprehensive regulatory framework for Commodities Exchanges and Warehouse Receipt Systems.

The Act recognizes commodities exchanges as essential infrastructure for economic diversification, especially in agriculture, energy, and extractives. It mandates registration with and regulation by the SEC, while outlining conditions for:

• Exchange operation and governance;
• Licensing of warehouse operators and collateral managers;
• Accreditation and standardization of warehouses and commodities;
• Trading of both physical commodities and derivatives (e.g., futures and options contracts).

Incorporating the warehouse receipt system into statute provides legal backing for the issuance and transfer of electronic warehouse receipts. The Act also stipulates that a warehouse receipt shall only be issued by an entity duly registered by the Commission and in a manner prescribed by the Commission^[28]. The warehouse receipts serve as proof of the holder having proprietary rights in the commodities and can be used as collateral for financing and improve liquidity in the commodities market. This development positions Nigeria to benefit from enhanced price discovery, food security, and rural economic inclusion^[29].

PART XVI – ISSUANCE OF SECURITIES

This part has been renamed in the Act from “Borrowing by Federal, State, and Local Governments and Their Agencies” to “Issuance of Securities” and is now divided into two sections: (a) Federal Government Agencies, States, Local Governments and their Respective Agencies, and (b) Issuance of Debt Securities by Body Corporate and Supranational Bodies. It continues to regulate the borrowing activities of Federal, State, and Local Governments and their agencies through the issuance of registered bonds and promissory notes.

A. Federal Government Agencies, States, Local Governments and their Respective Agencies

This section applies to Federal, State, and Local Governments, the Federal Capital Territory, wholly government-owned companies, and any company whose borrowing is backed by public guarantees^[30].

Key Provisions include:

• Eligible Instruments: Authorized instruments include bonds, promissory notes, non-interest financial instruments, and others as approved by the Securities and Exchange Commission (SEC)^[31].

• Debt Types:

v  General Obligation Debt Securities: Backed by the full faith and credit of the issuing entity, repayable from consolidated or statutory revenue.

v  Project-Tied Debt Securities: Secured against specific project revenues or government guarantees, emphasizing infrastructure financing.

• Sustainability Thresholds: Debt service obligations must not exceed 40% of the issuer’s prior year revenue or must comply with debt sustainability ratios set by the SEC or relevant authorities.
• Custodian Requirements: Proceeds of bonds must be warehoused with an SEC-registered custodian to ensure they are used strictly for the stated purpose^[32].
• Transparency Measures:

v  Detailed fund use disclosures must be published in official gazettes^[33].

v  Registrars must maintain a comprehensive, auditable register of securities holders^[34].

v  All securities must be issued in dematerialized form, although investors can request bond certificates.

• Trustees and Investor Rights:

v  Trustees are required for each issuance and are empowered to act in the interest of bondholders.

v  Investors may pursue legal remedies in the event of default or mismanagement.

B. Issuance of Debt Securities by Body Corporate and Supranational Bodies

This part introduces a more formal structure for regulating private sector and international debt capital issuances.

Key Highlights include:

• Prior SEC Approval: All issuances must undergo prior review and approval by the SEC. This includes compliance with eligibility, credit rating, disclosure, and trust deed requirements^[35].
• Default Bar: Entities with defaults on previous debt for more than one month are barred from raising fresh capital.
• Mismanagement or diversion of proceeds attracts up to 15 years’ imprisonment.
• Alternatively, administrative penalties include 500% restitution of misused funds.

PART XVII – ESTABLISHMENT, JURISDICTION, AUTHORITY AND PROCEDURE OF THE INVESTMENTS AND SECURITIES TRIBUNAL

The number of members of the Investments and Securities Tribunal (IST) has been increased from 10 to 12^[36]. As a specialized court, the IST must retain non-lawyer members who are seasoned capital market experts, whose technical expertise contributes significantly to the Tribunal’s unique composition and effectiveness. Simultaneously, the number of legal practitioners required to be appointed to the Tribunal has been increased from a minimum of four (4) to eight (8), enhancing its legal capacity.

Under the 2007 Act, appointments were made by the Minister. However, the ISA 2025 provides that appointments are to be made by the President, based on the recommendation of the Minister^[37]. This change is intended enhance the visibility of the IST and supports its anticipated recognition as a specialized court under the Constitution. At the same time, the structure ensures adequate ministerial oversight over the administration of the Tribunal.

This part also provides for the Tribunal to continue its operations in the absence of a Chairman by allowing the most senior full-time member act in stead of the Chairman during his absence.

Another introduction is the provision of section 324 (2) which states that the Chief Registrar of the tribunal shall be a legal practitioner of at least 10 years ‘post call experience in capital market matters. It is considered more professional to appoint a qualified Legal Practitioner rather than “ fit and proper” person as stated in Section 282 of the 2007 Act.

It is important to note that Section 283 (3) of the 2007 Act which provides for the expenses of the Tribunal to be charged and paid from the Consolidated Revenue Fund of the Federation has been deleted. This is because the Consolidated Revenue Fund is a Constitutional Fund which can only be disbursed in line with the provisions of the Constitution. Also, the provision in subsection (2) of the 2007 Act has been deleted because there is no similar institution to the tribunal in the capital market.

Furthermore, Section 293 (3) of the 2007 Act which requires the judgment of the Tribunal to be registered at the Federal High Court before its enforcement has been deleted. This is why the power to enforce its decisions and judgments and the power to cite for contempt has been added to the powers of the Tribunal.

PART XVIII – MISCELLANEOUS PROVISIONS

The Act introduces a provision stating that the Commission must be issued with at least 14 days’ written notice before initiating a lawsuit against it. The notice must clearly state the cause of action, details of the claim, the plaintiff’s name and address, and the relief being sought^[38].

The Act also introduces more stringent provisions on penalty for contravention of any provisions of the Act. An example is by increasing the monetary penalty from not less than N100,000 (One Hundred Thousand Naira) in the repealed act to not less than N1,000,000 (One Million Naira) and a further sum from N5,000 (Five Thousand Naira) for everyday the contravention occurs to N20,000 (Twenty Thousand Naira) till it is cured.

A capital market operator shall be deemed to have ceased to operate as such if it has ceased to operate for more than 180 days unless it has obtained the approval of the Commission to do so, or by virtue of any directive issued by the Commission[39].

The Act further provides that an employee of a capital market operator has the obligation to disclose information connected with activities of their employer which tends to show criminal offences or non-compliance with legal obligations. Where an employee is relieved of his employment on ground of this disclosure, such an employee is entitled to compensation which shall be calculated as if he had attained the maximum age of retirement or had served the maximum period of service, in accordance with his conditions of service.

The ISA 2025 mandates a capital market operator to first see the written approval of the Commission prior to changing its registered name, its shareholding, or directors, or refereeing to itself by an abbreviation or a derivative of its registered name. failure to obtain prior approval invalidates any changes made by the CMO[40].

CONCLUSION

The Investments and Securities Act, 2025 marks a progressive leap for Nigeria’s capital markets. By introducing new regimes for commodities trading, enhancing public securities issuance processes, and modernizing legal definitions, the Act positions Nigeria for sustainable economic growth and global competitiveness. These changes not only protect investors but also foster innovation, transparency, and access to capital across traditional and non-traditional markets.