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Ponzi Scheme Promoters Risk Jail Term As Nigerian Lawmakers Consider Capital Market Bill

(AFRICAN EXAMINER) – The House of Representatives has passed for second reading a bill to repeal and re-enact the Nigerian Capital market, Investments and Securities Act.

The bill seeks, among other things, to prohibit Ponzi schemes and other pyramid investments.

If the bill finally becomes a law, promoters could face 10 years imprisonment if convicted by the court.

The bill, sponsored by Ibrahim Babangida (APC, Kano), was read the second time on Thursday after a debate on its general principles.

In his lead debate, Mr Babangida informed his colleagues that the existing bill was signed into law in 2007 by the former President Umar Yar’Adua, however, “current trends in capital markets regulation have made it imperative to make major improvements to the Act to align our market with international standards.”

To address the menace of Ponzi schemes, Mr Babangida said the bill seeks to empower the Nigerian Security and Exchange Commission (SEC) to shut down such prohibited investment schemes.

He stated that the bill has adequate provision to enhance 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 term of not less than 10 years for promoters of such schemes,” Mr Babangida said.

Speaking further, he said the bill also seeks to provide legal framework to regulate derivatives and commodities trading to deepen the Nigerian capital market and the economy.

“A derivative is a bilateral contract whose value is derived at a future date from an underlying asset, such as a commodity, currency, interest rate, property value, company share, etc.

“Derivatives are financial instruments used for hedging and risk management. Although the Commission (SEC) had previously created rules on the subject matter and the bill contains provisions that reinforce the Commission’s powers to regulate this category of instruments.

“Similarly, an entirely new part is inserted in the Bill as a bedrock for the regulation of Commodity Exchanges and Warehouse Receipts by the Commission. These new provisions are essential to allow for the development of the entire gamut of the Commodities ecosystem,” Mr Babangida said.

The lawmaker added that the bill seeks to introduce new provisions to regulate the activities of financial market infrastructure, as well as netting and bankruptcy provisions to protect investors in derivatives contracts.

Mr Babangida said the bill is seeking to introduce additional 35 sections to the existing Act.

The lawmakers voted overwhelmingly in support of the bill when the Speaker Femi Gbajabiamila, put it to vote.

Short URL: https://www.africanexaminer.com/?p=73001

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