SEC Cautions Investors Against Unregistered Crowdfunding Platforms

The Securities and Exchange Commission has warned investors against patronising unregistered crowdfunding platforms.

The Commission said this in a circular on Thursday.

Crowdfunding is the process of raising funds to finance a project or business from the public through an online platform.

SEC said it has observed with concern the fraudulent activities of some unregistered investment crowdfunding platforms.

The apex capital market regulating body stated that in recognition of the potentials and importance of crowdfunding platforms and the need to protect investors through effective regulation, had in January 2021 published its crowdfunding rules and requested well-intending crowdfunding platforms to register with the Commission and comply with the Rules by June 30, 2021.

The commission also urged well-intending crowdfunding platforms to register and comply with the rules.

“The Commission by this circular hereby notifies the general public and operators of unregistered crowdfunding platforms, that operating any crowdfunding platform that is not registered by the Commission is illegal and may lead to prosecution of such operators and loss of investment by their clients,” the statement reads.

“Members of the public are further advised to confirm the registration status of any entity soliciting their participation in any investment scheme by contacting the Commission through its website: sec.gov.ng, e-mail: sec@sec.gov.ng, Phone no: 09-4621168.”

In a January 2021 rules published by SEC, the commission said, ““A proposed rule has been developed to provide a regulatory framework permitting private companies with the required structure and mechanism in place to raise capital from the public through crowdfunding.”

It noted that Micro, Small and Medium Enterprises (MSMEs) incorporated as a company in Nigeria with a minimum of two-years operating track record should be eligible to raise funds through a crowdfunding portal registered by the commission.

According to the commission, total fees payable to parties to a crowdfunding issue shall not exceed two per cent of the total funds raised.