Chaka: Pioneering regulatory advancements in investment-tech sector
Less than a month after Nigeria’s Securities and Exchange Commission (SEC) warned Capital Market Operators (CMO) to stop giving support to investment-tech start-ups providing access to foreign securities in Nigeria, the industry regulator rolled out plans to licence the innovators.
The Commission said its intention to licence the firms offering foreign stocks under a “Digital Sub- broker” licence is to provide a form of clarity to their activities. The requirement for obtaining the licence, according to SEC, will include regulatory responsibilities in on-boarding clients, custody of assets, and meeting the compliance with reporting requirements.
Chaka Technologies, a Nigerian Fintech start-up that is connecting African businesses and individuals to global and local capital markets is in line to be one of the first to be granted the licence as the company has announced that it is at “the finish line with the SEC”, a path its innovative peers might need to take to bring their activities under the SEC’S purview.
Chaka’s journey to getting the SEC permit did not start in April 2021. According to Chaka, it has always maintained a strict commitment to compliance. From inception, the company said it made it imperative that all equities available through its app are offered through regulated parties like Citi Investment Capital Limited (CICL) and others who are licensed by the Nigerian SEC and other financial regulators.
Following Chaka’s engagement with the regulator, it said it was pleased to inform its stakeholders and the public that it has taken the necessary steps to register with the Securities and Exchange Commission of Nigeria “for a newly created license,” now referred to as the “Digital Sub-broker License”.
Under the leadership of Tosin Osibodu, CEO at Chaka Technologies, the company whose existence is based on removing barriers to investment said it believes proactive engagement with the regulators is important as it holds great potentials for long term growth.
Chaka’s advocacy for synergy between regulators and Fintechs
Following the restriction of Chaka’s operations by SEC in December 2020, the company’s team worked closely with the Commission to accelerate a solution. The SEC was committed to ensuring that only players who are regulated can operate within the space to ensure investor protection and transparency within the market without stifling innovation. These delegations to reach a resolution then led up to the creation of the Digital Sub- broker license, which Chaka is now in line to receive and become fully compliant to operate within the sector, following SEC’S amendments.
This is SEC’S 1st Fintech and innovation license and given their mission, Chaka expects that there will be more clarity given to the market in the short term as to who they can trust. In the long term, Chaka said it expects more opportunities for Nigerians to grow and build wealth and it expects more innovative initiatives from the SEC.
What SEC’S 1st Fintech License means for the industry that will enable it to regulate investment-tech companies came on the heels of the Commission’s avowed intention to encourage innovation within the market space, whilst also ensuring that all market activities are brought within the regulatory purview and conducted within the ambit of the law and extant regulations.
The Commission said it was concerned that without proper regulation, the genuine aspirations of market innovators and investors could be subverted through the activities of unscrupulous actors who would try to exploit the growing popularity of Fintech investment options, to the detriment of the investing public.
When the Commission eventually grants industry players the new licence, it will help to strengthen privatepublic partnership while also encouraging other sectors to embrace engagement with various industry regulators for easy resolution.
The new licence will no doubt increase investors’ confidence to use the Fintech companies that will be certified by the industry regulator, especially at a time like this when some investment-tech companies have been accused of mismanaging investors’ funds.
Improved trust in the industry players is expected to increase investment appetite and consequently, the use of the innovative products offered by Fintechs. Nigerian investors have been in search of investment opportunities t and products offered by investment- tech firms are expected to be the gateway for them to access various investment opportunities within Nigeria and international markets.