The Securities and Exchange Commission (SEC) has again warned investors against the activities of unregistered investment crowdfunding platforms.
Crowdfunding is the process of raising money to fund a project or business from the public through an online platform. Crowdfunding portal is a website, portal, intermediary portal, application or other similar module that facilitates interaction between fundraisers and the investing public
The SEC, in a circular, said it observed with concern the fraudulent activities of certain unregistered investment crowdfunding platforms and strongly advises the investing public not to make investments with or through an unregistered crowdfunding platform. registered with the Commission.
The commission said that, recognizing the potential and importance of crowdfunding platforms and the need to protect investors through effective regulation, in January 2021 published its crowdfunding rules and called on well-meaning crowdfunding platforms to register with the Commission and comply with the rules. before June 30, 2021.
According to the circular, “The commission, by this circular, hereby notifies the general public and operators of unregistered crowdfunding platforms, that the operation of any crowdfunding platform not registered by the Commission is illegal and may result in legal action against these operators and loss of investment by their customers.
The commission recently issued rules on crowdfunding, which stated that “a proposed rule has been developed to provide a regulatory framework to enable private companies to have the structure and mechanism necessary to raise capital from the public through through crowdfunding.
He noted that micro, small and medium-sized enterprises (MSMEs) incorporated in Nigeria with a minimum of two years of operational experience should be eligible to raise funds through a crowdfunding portal registered by the commission.
“The total fees payable to parties to a crowdfunding issue must not exceed 2% of the total funds raised. The commission noted that the maximum amount that can be raised by an average company must not exceed N100 million.
“The maximum amount that can be raised by a small business should not exceed 70 million naira; and the maximum amount that can be raised by a micro-enterprise should not exceed N50 million.
“The limits set out above do not apply to MSMEs operating as digital product investment platforms or other MSMEs that may be designated by the commission from time to time,” he said. .
The commission explained that retail investors could not invest more than 10% of their annual income in a calendar year.
He added that a crowdfunding portal located outside of Nigeria will be deemed to be actively targeting Nigerian investors, if the operator or operator’s representative directly or indirectly promotes the platform in Nigeria, adding that a crowdfunding portal could be registered and operated only by one operator. registered with the SEC as a crowdfunding intermediary.
The rule added that only entities registered with the Commission as an exchange, broker, dealer, broker/dealer or alternative trading system as prescribed by law and SEC rules and regulations could be registered as crowdfunding intermediary.
He added that the crowdfunding portal or crowdfunding intermediary who fails to comply with the rules will be liable to a fine of at least 1 million naira and a sum of 10,000 naira for each day the violation continues.