The House of Representatives has approved for second reading a bill to repeal and re-enact the Nigerian Securities, Investments and Capital Markets Act.
The bill seeks, among other things, to ban ponzi schemes and other pyramid investments.
If the bill eventually becomes law, the promoters could face 10 years in prison if convicted by the court.
The bill, sponsored by Ibrahim Babangida (APC, Kano), was read for the second time on Thursday after a debate on its general principles.
In his main discussion, Mr. Babangida informed his colleagues that the existing bill was signed into law in 2007 by former President Umar Yar’Adua, however “current trends in the regulation of capital markets have made it imperative make important improvements to the Law to align our market with international standards.”
To address the threat of Ponzi schemes, Mr. Babangida said the bill seeks to empower the Nigerian Securities and Exchange Commission (SEC) to shut down such prohibited investment schemes.
He stated that the bill has adequate provisions to enhance the efficient regulation of investment schemes and to effectively combat the proliferation of Ponzi schemes in Nigeria.
“The bill prohibits Ponzi/Pyramid schemes as well as other illegal investment schemes and prescribes a jail sentence of not less than 10 years for the promoters of such schemes,” Mr. Babangida said.
Speaking further, he said the bill also seeks to provide a legal framework to regulate derivatives and commodity trading to deepen Nigeria’s capital market and economy.
“A derivative is a bilateral contract whose value is derived at a future date from an underlying asset, such as a commodity, a currency, an interest rate, the value of a property, a share of a company, etc.
“Derivatives are financial instruments used for hedging and risk management. Although the Commission (SEC) had previously created rules on the matter and the bill contains provisions that reinforce the powers of the Commission to regulate this category of instruments.
“Similarly, a completely new part is inserted in the bill as a basis for the regulation of commodity exchanges and depository receipts by the Commission. These new provisions are essential to enable the full range of the commodity ecosystem to develop,” said Mr. Babangida.
The legislator added that the bill seeks to introduce new provisions to regulate the activities of the financial market infrastructure, as well as compensation and bankruptcy provisions to protect investors in derivative contracts.
Mr. Babangida said that the bill seeks to introduce 35 additional sections to the existing Law.
Lawmakers overwhelmingly voted in favor of the bill when President Femi Gbajabiamila put it to the vote.
This is a welcome development. Kudos, ,and keep it up, NASS. There ‘s so much threat against the citizens of this country, in the hands of pyramid businesses and get-rich-quick smart guys.