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FinTechs belonging to this category operate trading platforms or online marketplaces for investment opportunities or certain financial contracts – e.g. securities, factoring etc. and sometimes furthermore provide contact to financial experts and tools for the decision-making.
FinTech-signalling and social trading platforms provide users with the opportunity to exchange opinions on financial investments and offer signal providers and traders the possibility to make their securities portfolio publicly visible. This way the portfolios can be linked to and followed by other traders via the platform automatically, so that the trading and investment strategy of the followed traders can be copied.
The platform often cooperates with a financial services provider or a credit institution where both the trader and the follower hold their securities accounts, and which execute the orders both of the trader and the follower and to which the platform passes on the trading decisions.
Introduction
Attitude of the country towards trading, social trading or signalling platforms
Trading, social trading, and signaling platforms have gained significant traction among Nigerians, particularly the youth, for various reasons. One of such reasons is the accessibility of trading, social trading and signaling platforms. Nigeria’s mobile penetration currently stands at about 87%, with 172 million mobile subscribers, the majority of whom are young Nigerians. Due to the ubiquity of mobile phones in Nigeria, many Nigerians can easily access, interact, and engage with these platforms.
Despite the burgeoning demand for trading, social trading and signaling platforms in Nigeria, regulatory bodies in Nigeria have adopted a cautious and conservative stance toward them. The regulators have expressed concerns that the potential
exploitation of these platforms could facilitate criminal activities like money laundering, terrorism and proliferation financing. Consequently, recent regulations issued by Nigerian authorities reflect this apprehensive approach aimed at mitigating such risks.
Legal affairs
Obligations and requirements to provide trading, social trading or signalling platforms described above
In Nigeria, trading platforms are regulated by the SEC and are classified by the SEC as Sub-brokers serving Multiple Brokers through a Digital Platform (the “Digital Sub-brokers”). To obtain a Digital Sub-broker license from the SEC, the prospective operators must first incorporate and register a company with the CAC. The company must maintain a minimum paid-up capital of ?10,000,000 (Ten Million Naira) which may be in the form of bank balances, fixed assets or investment in quoted securities. The company must also have a current fidelity insurance bond covering at least 20% of the minimum paid-up capital.
After incorporation, the company must submit an application to the SEC for registration as a Digital Sub-broker. Under the SEC Rules 2013, the company is obligated to pay the following: ?100,000 ($66) as a filing/application fee, ?300,000 ($197) as a processing fee, ?100,000 ($66) for each sponsored individual, and ?1,000,000 ($654) as a registration fee.