Crowdfunding Rules and Regulations in Nigeria Released by SEC

Crowdfunding Rules and Regulations in Nigeria Released by SEC

Wednesday, January 27, 2021 / 10:47 AM / By SEC / Header Image
Credit: iupana

 

The RULE on CROWDFUNDING in
Nigeria

New
Rules and Sundry Amendments as at January 21, 2021
(PDF)

 

PART 1 – GENERAL PROVISIONS

1.     Definition
of Terms

 

Act: The Investments and Securities Act 2007, or as amended;

AML/CFT: Anti-Money Laundering /Combating the Financing of Terrorism;

Associated Person: means any sole proprietor, partner, officer, director or manager of a
funding portal, or other natural person occupying a similar status or
performing similar functions, or any natural person directly or indirectly
controlling or controlled by a funding portal member, or any employee of a
funding portal member;

Blind pool: A company that raises capital from the public without any stated
investment goals informing investors how their funds will be utilised;

Complex Structures: A complex structure is an entity without immediate transparency of
ownership and/or control thereby making it difficult to immediately ascertain
the beneficial owners of the entity;

Control: For the purpose of this rule, an entity will be regarded as controlled
by the Fundraiser or being under common control with the Fundraiser where the
Fundraiser or the entity in control:

(a)  beneficially owns more than one half of the issued share capital of the
company; or

(b)  is entitled to vote a majority of the votes that may be cast at a
general meeting of the company, or has the ability to control the voting of a
majority of those votes, either directly or through a controlled entity of that
company;

(c)  is able to appoint or to veto the appointment of a majority of the
directors of the company;

(d) is a holding company, and the company is a subsidiary of that company
as contemplated by the Companies and Allied Matters Act.

(e)  has the ability to materially influence the policy of the company in a
manner comparable to an entity who, in ordinary commercial practice, can
exercise an element of control referred to in paragraphs (a) to (d).

Cooling-off Period: An interval during which the investor can withdraw the decision to invest;

Crowdfunding: The use of small amounts of money, obtained from a large number of individuals
or organizations, to fund a project or, a business through an online web-based platform;

Crowdfunding Portal: A website, platform, portal, intermediary portal, application, or other
similar module that facilitates interaction between Fundraisers and the
investing public;

Crowdfunding Intermediary: An entity organized and registered as a corporation to facilitate
transactions involving the offer or sale of securities or investment
instruments through a Crowdfunding Portal;

Commodities Investment Platform: An electronic platform that connects investors to specific agricultural
or commodities projects for the purpose of sponsoring such projects in exchange
for a return;

Family Member: A member of the investor’s household or a relative with whom the investor
has a close personal relationship including any person who lives with the investor;

Funding Round: The round of funding for a specific project, business, or venture hosted
on a crowdfunding portal to raise funds from a large number of people in exchange
for shares, debt securities or other investment instruments approved by the Commission;

High Net Worth Investor: Shall have the same meaning as provided in the SEC Rules;

Investment-based crowdfunding: The process of raising funds from the public through an online portal
in exchange for shares, debt securities or other investment instruments
approved by the Commission;

Investment Instruments: Ordinary shares, plain vanilla bonds or debentures, and simple investment
contracts approved by the Commission for issuance through a crowdfunding portal
from time to time”;

Investor: is as defined in the Act;

Fundraiser: refers to the originator, maker or obligor of the investment instrument
to be issued pursuant to these Rules;

KYC: Know Your Customer;

Material Adverse Change: Means any event, development or circumstance that has had or could
reasonably be expected to have an unfavourable effect. It also includes changes
in the condition (financial or otherwise), operations, business, performance, properties
or assets of the Fundraiser and its Subsidiaries, taken as a whole such that it
would impede them from delivering on their intended activity or commitment;

Minimum Threshold: The minimum percentage of the target amount which must be raised by a Fundraiser
in a funding round in order to be eligible for the disbursement of the
proceeds;

MSME: Micro, small and medium enterprises shall be as prescribed by the Small
and Medium Enterprises Development Agency of Nigeria (SMEDAN) in relation to
total asset annual turnover or number of employees;

Non-Permissible Investment
Instrument:
Means any investment instrument other than
an Instrument defined under-investment instrument;

Operator: A Crowdfunding Intermediary registered by the Commission;

Plain vanilla bonds/debentures: Non-complex debt instruments with fixed rates and a defined maturity
that involves an investor (lender) purchasing a bond at its face value, receiving
periodic interest payments from the bond Fundraiser (borrower) and receiving the
full principal upon maturity;

Predecessor: An entity which has been replaced by another entity whether through a merger,
acquisition, or other form of corporate action;

Public Company by Default: A private company whose members exceed 50 as prescribed by the Companies
and Allied Matters Act (CAMA) at the end of a funding round;

Qualified Institutional Investor: Shall be as defined in the SEC Rules;

Retail Investor: Any individual investor other than a Corporate, High Net worth, Sophisticated
Investor or Qualified Institutional Investor;

Simple Investment Contract: A contract or scheme for the placing of capital in a way intended to
secure income or profit from its employment and includes participation in any
profit-sharing agreement by virtue of which:

  • The investors
    provide the capital;
  • The promoters
    manage, control and/or operate the enterprise; and
  • The investors
    share in the earnings and profits;

Sophisticated Investor: Shall for the purpose of this Rule, mean any person with 3 years’ experience of actively investing in the capital market and understands the relationship
between risk and return;

Tag-along Rights: Means pre-negotiated agreements allowing minority stakeholders to sell
shares under the same conditions as majority stakeholders.

Target Plan: Means the proposed use of the funds to be raised on the portal
specifying full details of the project to be funded and documentary evidence of
all forms of insurance, and contract with relevant third parties including
off-takers and land owners (as applicable).

Trust Account: is as defined in the Act. 

 

2.    Applicability

These Rules shall
apply only to Investment-Based Crowdfunding.

 

3.    Eligibility

Only the following
entities shall be eligible to raise funds through a Crowdfunding Portal
operated by a registered Crowdfunding Intermediary, in exchange for the issuance
of investment instruments;

          i.     MSMEs incorporated as a company in
Nigeria with a minimum of 2 years’ operating track record;

              
ii.         
MSMEs incorporated as a company in
Nigeria with less than 2 years’ operating track record but which has a strong
technical partner that possesses a minimum of 2 years’ operating track record
or has a core investor;

 

4.    Exemptions from Certain Provisions
of the Act

1.      A Fundraiser may offer or sell investment instruments under these Rules
without the need for prior registration of the investment instruments pursuant
to the Act, provided that:

a)    The Fundraiser is an entity incorporated in Nigeria, and accredited
and/or accepted by a Crowdfunding Intermediary to utilize its portal;

b)    The aggregate amount of investment instruments that can be offered and
sold by the Fundraiser within a 12-month period shall comply with the following
limits:

                        i.   The maximum amount
which may be raised by a Medium enterprise shall not exceed N100Million;

                        
ii.     
The maximum amount which
may be raised by a Small enterprise shall not exceed N70Million;

                      
iii.  
The maximum amount
which may be raised by a Micro enterprise shall not exceed N50Million

2.     The limits set forth above shall not apply to Commodities Investment
Platforms, or such other

MSMEs as may be designated by the Commission from time
to time.

3.     The aggregate amount of investments instruments sold to any investor
across all Fundraisers in investment-based crowdfunding during the 12-month
period shall not exceed the following limits:

     i.         Retail investors may
not invest more than 10% of their net annual income in a calendar year.

                        
ii.         
Sophisticated, High
Net worth and Qualified Institutional Investors are not subject to the limits
set forth above.

4.     The issuance of investment instruments shall be conducted through a
Crowdfunding Portal operated by a registered Crowdfunding Intermediary.

5.     For the purpose of calculating the aggregate amount of investment instruments
offered and sold by Fundraiser under this Rule, and determining whether a
Fundraiser has previously sold investment instruments within a 12-month period,
the term Fundraiser as used in this Rule, shall include all entities controlled
by or under common control with the Fundraiser and any predecessors of the
Fundraiser.

 

 

 

PART 2 – CROWDFUNDING PORTAL REQUIREMENTS

 

5. General Provisions

(a) Every portal that facilitates,
operates, provides or maintains interactions between fundraisers and the investing
public (crowd) in Nigeria for the purpose of any investment-based crowdfunding
shall be operated only by an entity registered as a Crowdfunding Intermediary

 

(b) An entity is considered to be
facilitating, operating, providing or maintaining a Crowdfunding Portal in
Nigeria if:

                          
i.         
the Crowdfunding
Portal is operated, provided or maintained in Nigeria; or

                        
ii.         
the Crowdfunding
Portal is located outside Nigeria but targets Investors in Nigeria; or

                      
iii.         
the component parts of
the portal when taken together are physically located in Nigeria even if any of
its component parts, in isolation, is located outside Nigeria;

 

(c) A Crowdfunding Portal that is located
outside Nigeria will be considered as actively targeting investors in Nigeria
if the operator, or the operator’s representative, promotes directly or
indirectly the Crowdfunding Portal in Nigeria;

 

(d) The requirement for registration as a
Crowdfunding Intermediary is as listed in Schedule 1 of these Rules;

 

(e) These provisions do not apply to:

                   i.         
a technology service
provider who merely provides the infrastructure, software or the system to an
operator;

                        
ii.         
an operator of a
communication infrastructure that merely enables orders to be routed to an
approved stock market;

                      
iii.         
an operator of a
financial portal that aggregates content and provides links to financial sites
of service and information provider.

 

6. Registration Requirements

(a) An application for registration of a
Crowdfunding Intermediary shall be made to the Commission in the prescribed
form and in the manner specified by the Commission and shall be accompanied
with Certified True Copies (CTC) of:

i.         
The certificate of incorporation certified by the
Corporate Affairs Commission (CAC);

ii.    Memorandum and Articles of Association and
amendments (if any) certified by the Corporate Affairs Commission;

iii.  CAC Form(s) showing Statement of Share Capital,
Return of Allotment, and Particulars of Directors;

iv.    Latest copy of the audited accounts or a copy of
the statement of affairs signed by its auditors and management accounts that
are not more than 9months old or a copy of the statement of affairs signed by
its auditor as at time of filing with the Commission;

v.  Management accounts that are not more than 1 month
old as at the time of filing with the Commission;

vi.  A profile of the Company which shall include
amongst other information; a brief history of the company, organizational and
shareholding structure, principal officers as well as details of past and
current activities;

vii.   The name(s) and address(es) of the company’s
subsidiaries/associated companies/ related entities, type of business and
percentage holding;

viii.  Evidence of payment of shares allotted to the
shareholders;

ix.         
Operational manual of the company;

x.         
Business plan;

xi  Existing or proposed by-laws or rules, and such
other document governing the conduct of fundraisers and investors on the
portal;

xii.    Sworn undertaking to promptly furnish the
Commission with copies of any amendments to its by-laws, rules, or codes;

xiii.       Information on Crowdfunding IT System to be
adopted;

xiv. Detailed information about the crowdfunding system
to be adopted including technical details associated with the portal’s online
presence;

xv.   Proposed brand name of the Crowdfunding Portal
including evidence of trademark registration of the brand name (where
applicable)

xvi.  Detailed information of all domain names of any
website through which the Crowdfunding Portal will be operated, social media
handles and any other online identifiers including evidence of registration
(where applicable)

xvii. detailed information about the promoters and
principal officers of the Crowdfunding Intermediary;

xviii. Sworn undertaking to keep such records and render
such returns as may be specified by the Commission from time to time;

xix. An application for registration of at least three
(3) principal officers of the Crowdfunding Intermediary as sponsored
individuals on the prescribed Form;

xx.   A person to be so appointed shall include the chief
executive of the Crowdfunding Intermediary, any person who is primarily
responsible for the operations and financial management, by whatever name
called;

xxi.       minimum paid-up capital requirement of N100
million;

xxii.     Current Fidelity Insurance Bond valued at a minimum
of 20% of the paid-up capital as stipulated by the Commission’s Rules and
Regulations;

xxiii.      a written declaration by the Chief Executive of the
Crowdfunding Intermediary, and which shall be filed annually, confirming that
the Crowdfunding Intermediary has, in relation to the Crowdfunding Portal:

a.    
sufficient and capable personnel to carry out
operations;

b.    
adequate security measures, systems capacity,
business continuity plan and procedures, risk management, data integrity and
confidentiality, record keeping and audit trail, for daily operations and to
meet emergencies; and

c.    
sufficient IT and technical support arrangements.

 

xxiv. Any other information required by the Commission
from time to time for the protection of investors.

(b) The cash assets ratio
shall be a minimum of 30% liquid assets and 70% fixed and other assets.

 

7. Criteria for
Registration

(a) The Commission may
register a Crowdfunding Intermediary if the Commission is satisfied that:

i.     the
Crowdfunding Intermediary will be able to operate an orderly, fair and transparent
system in relation to the investment instruments that are offered through its
electronic platform;

ii.  the board,
chief executive, and any officer of the Crowdfunding Intermediary who is
primarily responsible for the operations or financial management of the Crowdfunding
Portal, are fit and proper persons who have not:

1.      been convicted, whether within or outside Nigeria, of an
offence involving fraud or other dishonesty or the conviction of which involved
a finding that he acted fraudulently or dishonestly;
2.     been convicted of an offence under the Act or any other law
relating to the capital market;
3.     been blacklisted by a professional body which he belongs
to;
4.     been subjected to any disciplinary process or action by the
Commission or other Self-Regulatory Organization in the Nigerian capital
market;
5.     contravened any provision made by or under any written law,
whether within or outside Nigeria appearing to the Commission to be enacted for
protecting members of the public:

a)    against financial loss due to dishonesty, incompetence or malpractice
by persons concerned in the provision of financial services or the management
of companies; or

b)    against financial loss due to the conduct of discharged or un-discharged
bankrupts;

6.     engaged in any unlawful business practice;
7.     engaged in or has been associated with any other business practices
or otherwise conducted himself in such a way as to cast doubt on his competence
and soundness of judgment; or
8.     engaged in or has been associated with any conduct that
cast doubt on his ability to act in the best interest of investors, having regard
to his reputation, character, financial integrity and reliability;

iii.         
the Crowdfunding
Intermediary will be able to manage any risk associated with its business and
operation;

iv.         
the
Crowdfunding Intermediary will be able to take appropriate action against a
person in breach of any rules, policies, terms and other standards of the portal
including directing the person in breach to take any necessary remedial measure;

 v.         
the rules
of the Crowdfunding Intermediary make satisfactory provisions:

1.      for the protection of investors and public interest;

2.     to ensure proper functioning of the market;

3.     to promote fairness and transparency;

4.     to manage any conflict of interest that may arise;

5.     to promote fair treatment of all users;

6.     to ensure proper regulation and supervision of its users,
or any person

7.     utilizing or accessing its portal, including suspension and
expulsion of

8.     such persons after consultation with the Commission;

9.     to provide an avenue of appeal against the decision of the
operator; and;
 

 vi.         
the
Crowdfunding Intermediary has sufficient financial, human and other resources
for the operation of the Crowdfunding Portal, as prescribed by the Commission
from time to time

 

8. Revocation of
Registration

(a) Without prejudice to the
provisions of the SEC Rules and Regulations, the Commission

may revoke the registration of
a Crowdfunding Intermediary where:

                i.         
the
Crowdfunding Intermediary fails to meet the requirements under any relevant provisions
of these rules;

           ii.         
the
Crowdfunding Intermediary fails or ceases to operate or maintain the Crowdfunding
Portal for a consecutive period of 6 months;

                  iii.         
there is a
failure to pay fees as prescribed by the Commission.

 

The Commission may cancel or
suspend the registration of a Crowdfunding Intermediary where the intermediary
contravenes any of the provisions of the Act, the rules and regulations, the
code of conduct for capital market operators, is guilty of fraud, repeated
defaults, has been convicted of an offence involving moral turpitude.

 

9. Change of Structure or
Cessation of Business Operations

(a)  The Crowdfunding Intermediary shall not change its
ownership structure or discontinue the business or operations of a Crowdfunding
Portal without the prior approval of the Commission.

(b)  When notifying the Commission of a proposed discontinuation
of the business or operations of a Crowdfunding portal, the Crowdfunding
Intermediary shall submit a plan for the reasonable conclusion of any of its
ongoing operations or processes for the consideration of the Commission;

(c)  Without prejudice to any provisions in this Rule, the
Commission may issue a directive or impose any term or condition for the purposes
of ensuring the orderly cessation of the business or operations of a
Crowdfunding Portal.

 

10. Action by the
Commission in the event of Cessation or Suspension

Without prejudice to the
powers of the Commission pursuant to the Act, where the Commission suspends,
cancels or revokes the registration of a Crowdfunding Intermediary, or where a
Crowdfunding Intermediary seeks to voluntarily cease operations, the Commission
shall issue directives regarding one or more of the following as may be applicable:

       i.         
Ongoing
issuances on the portal;

     ii.         
Funds held
with custodians on behalf of Fundraisers;

   iii.         
Repayment
to its of investors;

   iv.         
Interim
management of the operations of the intermediary;

     v.          
Such other
matter as the Commission considers necessary in the interest of investors.

 

 

PART 3 – OBLIGATIONS OF THE CROWDFUNDING INTERMEDIARY

 

11. General Obligations

Every Crowdfunding
Intermediary shall

1.      disclose and display prominently on its portal, information
relating to the portal and its use including:

(a)  disclosures of the Fundraisers in respect of:

                          
i.         
Details of
ownership, management and overall controls structure in place at the time of
the offering;

                        
ii.         
Details of
control measures that will guard against losses or certifications possessed by
the underlying business, if any; and

                      
iii.         
Any other
information relating to Fundraisers hosted on the portal as required by these
regulations;

(b)  investor education materials and appropriate risk
disclosures;

(c)  information on how the portal facilitates the investor’s
investment including providing communication channels to permit discussions
about offerings hosted on the portal;

(d) a general risk warning on participating in funding through
the portal;

(e)  information about complaints handling or dispute resolution
and its procedures;

(f)   the fees, charges and other expenses that it may impose on
a Fundraiser or investor.

(g)  An attestation by the crowdfunding intermediary that it has
verified the

(h) legitimacy of the Fundraiser’s business;

(i)   An attestation by the crowdfunding intermediary that the
operations of the Fundraiser’s business are in agreement with the disclosed
objectives and will continue to be so;

 

2.    
carry out
investor education programmes;

 

3.    
ensure the
disclosure document lodged with the portal by each Fundraiser is verified for
accuracy and made accessible to investors through the portal;

 

4.    
inform
investors of any material adverse change to a Fundraiser’s proposal as set out
under this rule;

 

5.    
Ensure
Fundraisers comply with the responsibilities and obligations prescribed by this
rule.

 

 

12. Due Diligence

(a)  A Crowd Funding Intermediary shall carry out due diligence
on prospective Fundraisers intending to use its portal;

(b)  the Crowdfunding Intermediary should ensure that a
Fundraiser seeking to offer and sell investment instruments through the portal
complies with the requirements in this regulation;

(c)  The scope of the due diligence by a Crowdfunding
Intermediary shall include taking reasonable steps to:

(i) conduct background checks
on the Fundraiser to ensure that the board of directors, officers and
controlling shareholder(s) of the Fundraiser are fit and proper and shall in
particular, verify that the board, chief executive, and any officer of the
Fundraiser who is primarily responsible for its operations or financial
management have not;

a)    been convicted, whether within or outside Nigeria, of an
offence involving fraud or other dishonesty or the conviction of which involved
a finding that he acted fraudulently or dishonestly;

b)    been convicted of an offence under the Act or any other law
relating to the capital market;

c)     been blacklisted by a professional body which he belongs
to;

d)    contravened any provision made by or under any written law,
whether within or outside Nigeria to be enacted for protecting members of the
public:

                                                             
i.    
against financial loss due to dishonesty, incompetence or malpractice
by persons concerned in the provision of financial services or the management
of companies; or

                                                           
ii.    
against financial loss due to the conduct of discharged or un-discharged
bankrupts;

e)     engaged in any unlawful business practice;

f)      engaged in or has been associated with any other business
practices or otherwise conducted himself in such a way as to cast doubt on his
competence and soundness of judgment; or

g)    engaged in or has been associated with any conduct that
cast doubt on his ability to act in the best interest of investors, having
regard to his reputation, character, financial integrity and reliability;

(ii) verify the accuracy and
viability of the business proposition of the Fundraiser, the solvency of the
Fundraiser and if the business forecast is based on sound assumptions; and

(iii) comply with all relevant
KYC, and AML/CFT regulations as stipulated by the Commission.

 

13. Monitoring and
Reporting

A Crowdfunding Intermediary shall:

(a)  monitor the conduct of Fundraisers on its portal and take
action against misconduct of the Fundraiser;

(b)  monitor Fundraisers to ensure that the fundraising limits
imposed on the Fundraiser are not breached;

(c)  comply with all reporting obligation as may be specified by
this rule and all rules and regulations relating to market operators;

(d) in addition to quarterly and annual CMO returns, file the
following reports with the Commission, through channels as may be stipulated
from time to time:

I.
Monthly reports specifying the
following:

1.      Total number of Fundraisers who raised funds through the
portal during the reporting period;

2.     Total number of investors who invested through the portal
during the reporting period;

3.     Number and Types of securities or investment contracts
issued during the reporting period;

4.     Total amount raised on the portal during the reporting
period;

5.     Such other information as may be required by the
Commission.

II.
Quarterly reports, specifying
the following:

1.      Information on Fundraisers who raised funds during the
reporting period;

2.     Total amount raised on the portal during the reporting
period;

3.     Observed breaches or risk incidents during the reporting
period and steps taken to address same;

4.     Complaints received and steps taken to resolve same during
the reporting period from investors;

5.     Such other information as may be required by the
Commission;

 

14. Data Protection and
Privacy

A Crowdfunding Intermediary
shall:

(a)  establish appropriate safeguards for ensuring the integrity
of the information received and published;

(b)  ensure security and confidentiality of information collected
from investors;

(c)  ensure that the security of the portal is incorporated into
the development and hosting of the website of the Crowdfunding Portal in a
manner which enables the general public identify its safety prior to creating
an account on the portal;

(d) comply with the provisions of the Nigerian Data Protection
Regulation and other applicable laws;

(e)  Maintain reliable and secure operating systems;

(f)   identify the sources of operational risks and adopt
adequate procedures and controls to avoid operational disruptions;

(g)  develop and implement a written identity theft prevention
program;

(h) install and ensure the operation of suitable back-up
facilities;

(i)   be adequately insured against portal failure or closure;

(j)   keep a copy of all relevant documents for a period of at least
7 years after the date on which the document comes into the possession of the
portal;

(k)  within 5 working days of receipt of a request for
information from an investor, provide a copy of, or an extract from, a document
that is relevant to the investor.

 

15. Operation of Trust
Account

(a)  Every Crowdfunding Intermediary shall appoint a custodian
registered by the Commission, who shall establish and maintain a separate trust
account for each funding round on its portal.

(b)  The Crowdfunding Intermediary shall only direct the custodian
to release the funds to the Fundraiser after the following conditions are met:

                          
i.         
the
targeted amount sought to be raised or the minimum threshold has been met;

                        
ii.         
there is
no material adverse change relating to the offer during the offer period; and

                      
iii.         
all
applicable requirements for the registration of securities have been met

(c)  Funds invested will be maintained by the Custodian in an
interest yielding trust account. The total funds raised and the accruing
interest will only be released to the Fundraiser after specified conditions
provided in these rules and regulations have been met.

(d) The Custodian shall take all reasonable steps and establish
measures to ensure that it performs all its responsibilities as required by
these Rules.

 

16. Issue, Publication and
acknowledgment of Warning Statements

(a) The Crowdfunding
Intermediary shall ensure that a warning statement is prominently displayed:

(i) to all visitors to the
site on the home page of the portal; and

(ii) to every investor, on the
subscription landing page for each Fundraiser; and

(iii) on all application forms
for investing through the portal.

 

(b) The Warning Statement
should among other things, warn and advise investors that;

(i) Investing through an
online portal is risky and Fundraisers raising funds through the portal include
new or rapidly growing ventures;

(ii) Investment in the
businesses hosted on the portal is very speculative and carries high risks;

(iii) Investors may lose their
entire investment, in the ordinary course of business, and must be in a
position to bear this risk;

(iv) Past results are not
indicative of future performance

(v) It is important to ask
questions, read all information given carefully, and seek independent financial
advice before committing themselves;

(vi) The investment limits of
investors are being monitored by the Crowdfunding Intermediary;

 

(c) The Crowdfunding
Intermediary shall ensure every investor affirms to a risk acknowledgement form
by which the investor confirms:

(i) their understanding that the
proposed investment is a risky investment;

(ii) the investor may be
overpaying for the securities or investment contracts issued;

(iii) their understanding that
there may be additional classes of shares with rights that are superior to the
class of shares being issued through crowdfunding;

(iv) they are able to
economically absorb the complete loss of the investment they intend to make;

(v) the proposed investment
amount falls within the prescribed investment limit for the investor category;

(vi) the investor will be
subject to a lock-in period of at least one year and may be subject to a
further restriction on the transfer of the securities;

(vii) the investor may never
be able to sell the securities or investment instruments,

(viii) the investor will be
provided with no disclosure or less disclosure than publicly traded companies,

(ix) the investor will not
have the benefit of protections associated with an investment made under a
prospectus;

(x) the investor will not be
entitled to claim from the National investor protection fund;

(xi) the portal will not be
responsible if the investor loses all or some of the money invested.

 

(d) At or before the time the
investor enters into an agreement to invest, the Fundraiser must obtain a
signed risk acknowledgement from the investor by which the investor confirms
that falls within the investment limits and acknowledges the risks associated
with the investment including the following:

(i) that the Investor is in
compliance with his total annual investment limit.;

(ii) that the investor has
seen and read the warning statement about crowd funding (as provided in these
Rules);

(iii) the investor understands
that investment-based crowd funding is risky and that the investor may never be
able to sell the securities;

(iv) the investor may be
provided with less disclosure than public companies provide;

(v) the investor may lose his
entire investment and confirms that he can bear that loss without suffering
undue hardship.

 

(e) The confirmation must be
obtained in writing in a separate document or, if it is obtained by electronic
means, through a process which ensures it is signed electronically in a legally
binding form, and obtained separately from the agreement to use the service.

 

(f) The document must be
retained by the Fundraiser for at least 7 years after distribution.

 

17. Compliance

(a)  Policies and procedures. A Crowdfunding Intermediary must
implement written policies and procedures relating to the operations of its
portal which are reasonably designed to achieve compliance with the provisions
of the Act and the rules and regulations thereunder.

(b)  Inspections and examinations. A Crowdfunding Intermediary
shall permit the examination and inspection of all of its business and business
operations that relate to its activities, such as its premises, systems,
portal, and records by representatives of the Commission.

 

 

18. Record Keeping

(a) A Crowdfunding
Intermediary shall make and preserve the following records:

(i) All records relating to an
investor who registers on the portal, purchases or attempts to purchase
securities or investments through its Crowdfunding portal;

(ii) All records relating to
Fundraisers who offer and sell or attempt to offer and sell securities or
investments through its funding portal and the control persons of such
Fundraisers;

(iii) Records of all
communications that occur on or through its portal;

(iv) All records related to
persons that use communication channels provided by a Crowdfunding Intermediary
to promote a Fundraiser’s securities or investments or communicate with
potential investors;

(v) Records of all maintenance
and internal change logs carried out on the portal;

(vi) All records provided by
such Crowdfunding Intermediary to Fundraisers and investors through portal or
otherwise, including, but not limited to:

1.      notices addressing hours of portal operations (if any),

2.     portal malfunctions,

3.     changes to portal procedures,

4.     maintenance of hardware and software,

5.     instructions pertaining to access to the Crowdfunding
portal; and

6.     denials of, or limitations on, access to the Crowdfunding
portal;

(vii) All written agreements
(or copies thereof) entered into by such Crowdfunding Intermediary relating to
its business as such;

(viii) All daily, monthly and
quarterly summaries of transactions effected through the Crowdfunding Portal,
including:

1.      Fundraisers for which the target offering amount has been reached
and funds distributed;

2.     Transaction volume, expressed in number of transactions, number
of securities involved in a transaction and total amounts raised by, and distributed
to, Fundraisers;

3.     A log reflecting the progress of each Fundraiser who offers
or sells securities through the funding portal toward meeting the target
offering amount.

 

(b) Organizational documents: A
Crowdfunding Intermediary shall make and preserve during the operation of its
Crowdfunding portal and of any successor Crowdfunding portal, all
organizational documents relating to the Crowdfunding portal.

 

(c) Format: The
records required to be maintained and preserved pursuant to paragraph (b) of
this Rule must be produced, reproduced, and maintained in a non-alterable
format which ensures the integrity of the content.

 

(d) Third parties : The
records required to be made and preserved pursuant to this section may be
prepared or maintained by a third party on behalf of a Crowdfunding
intermediary provided that:

(i) An agreement with a third
party shall not relieve a Crowdfunding Intermediary from the responsibility to
prepare and maintain records as specified in this rule.

(ii) A Crowdfunding
Intermediary must file with the Commission a written undertaking in a form
acceptable to the Commission and signed by a duly authorized person of the
third party, stating in effect that;

1.      such records are the property of the Crowdfunding Intermediary;
and

2.     will be surrendered upon request by the Crowdfunding
Intermediary.

(iii) The undertaking shall
include the following:

 

With respect to any books and
records maintained or preserved on behalf of [name of Crowdfunding Intermediary,
the undersigned hereby acknowledges that the books and records are the property
of [name of Crowdfunding Intermediary,] and hereby undertakes to permit
examination of such books and records at any time, or from time to time, during
business hours by representatives of the Securities and Exchange Commission and
to furnish to the Commission, and its representatives, a true, correct,
complete and current copy of any, all, or any part of, such books and records.

 

(e) Examination of Records: All
records held by a Crowdfunding Intermediary are subject at any time, or from
time to time, to reasonable periodic, special, or other examination by the
representatives of the Commission as the Commission may deem necessary or
appropriate in the public interest or for the protection of investors. Every
Intermediary and/or Fundraiser shall furnish to the Commission true, correct,
complete and current copies of such records of the Intermediary and/or
Fundraiser that are requested by the representatives of the Commission.

 

(f) Preservation of Records: The
records required to be kept under this part shall be preserved for a period of
at least 7 years and kept at the principal place of business of the
Crowdfunding Intermediary. If the principal place of business is outside Nigeria,
then upon request of the Commission, the operator shall provide such records as
requested at a place in Nigeria within seventy-two (72) hours after receipt of
the request.

 

(g) Submission of Yearly
Reports: The Crowdfunding Intermediary shall, not later than 30 days
after the end of each year, submit a report on all crowdfunding transactions on
its crowdfunding portal. The Crowdfunding Intermediary shall file with the
Commission and post on the crowdfunding portal;

(i) a report on an annual
basis along with Fundraiser disclosures

(ii) other Fundraiser
submissions certified by the principal executive officer of the Fundraiser to
be true and complete in all material respects; and

(iii) a description of the
financial condition of the Fundraiser as described under Fundraiser
Requirements”.

 

19. Use of Manipulative,
Deceptive or Other contrivances

No Crowdfunding Intermediary
or associated person of a Crowdfunding Intermediary shall effect any
transaction in, or induce the purchase or sale of, any security or investment
instrument by means of, or by aiding or abetting, any manipulative, deceptive
or other fraudulent device or contrivance.

 

20. Restriction on Cross
Ownership

A Crowdfunding Intermediary
shall not allow a Fundraiser to raise funds on its Portal if the Crowdfunding
Intermediary or any of its officers, directors, significant shareholders or
associated persons beneficially own or control more than 5% of the securities
of that Fundraiser.

 

PROVIDED THAT where the directors, significant shareholders or
associated persons of the Crowdfunding Intermediary beneficially own or control
more than 5% of the securities of a Fundraiser seeking to raise funds through
its portal, the prior approval of the Commission shall be sought before the Fundraiser
is granted access to the portal.

 

PART 4 PARTICIPANTS FOR CROWDFUNDING

 

21. Fundraiser

(a) A Fundraiser shall offer
its investment instruments through a Crowdfunding Portal operated by a
registered Crowdfunding Intermediary;

 

(b) All Fundraisers shall be
required to file a standardized offering document with the Crowdfunding Intermediary
providing amongst others:

(i) key information on the
Fundraiser, including name, legal status, physical address, place of
incorporation and website;

(ii) the use of the proceeds;

(iii) the nature of its
existing or proposed business, its business plan, the offering amount to be
raised and the duration of the offer;

(iv) proposed details of
applicable return on investment, coupon rate or profit-sharing structure as
well as information on historical performance if any;

(v) a certification signed by
the Fundraiser stating that:

1. the offering document does
not contain a misrepresentation; and

2. Investors have rights of
action and withdrawal in the case of a misrepresentation

(vi) financial information
relating to the Fundraiser including;

1. Unaudited interim reports
and accounts

2. Comprehensive schedule of
the Fundraiser’s current debt profile by type, purpose, tenor and maturity
dates;

3. bank reference on the
Fundraiser;

4. evidence that the issue
does not exceed the limit of the Fundraiser’s borrowing powers or issued share
capital;

5. details of any bank
overdrafts, loans, mortgages, charges, hire purchase commitments or guarantees
or other material contingent liabilities of the Fundraiser and any of its subsidiaries;

6. details of the nature and
extent of the interest direct or indirect, if any, of every director in any
assets;

7. A statement by the
directors that in their opinion the working capital available is sufficient, or
if not, how it proposes to provide the additional working capital required;

8. details of any share
options or such incentives to any person, including without limitation,
directors, employees, and other officers of the Fundraiser; and

9. other information as the
Commission may require from time to time.

(vii) Two years Audited
financial statements (if any) or Audited Statement of Affairs;

(viii) A clear outline of
investors rights and ownership of investment instruments;

(ix) details of all crowdfunding
campaigns embarked on.

 

(c) An eligible Fundraiser
shall maintain an accurate list and details of all investors post issuance,
which shall include the full names, address, email and the number of units and
monetary value of investment instruments and which shall specify investors from
countries other than Nigeria.

 

(d) Fundraiser shall make the
offering document available to the investor through the portal before the
investor enters into an agreement to purchase the investment instrument.

 

(e) A Fundraiser offering
securities or investment instruments shall provide an investor with a
contractual right to withdraw from an offer or agreement to purchase the
securities or investment instrument by delivering a notice to the funding
portal up to 48 hours before the close of the offer

 

(f) The offering document
shall not be posted on its website or any other media apart from those of the
Crowdfunding Portal, provided however that the Fundraiser may post a notice on
its website regarding the offering which directs users to the details on the
Crowdfunding Portal.

 

(g) The Crowdfunding
Intermediary shall deliver a copy of the offering materials to the Commission
at the time they are posted on its portal.

 

(h) Disclosure shall be
provided about any entity or person other than the Fundraiser promoting the offering.

 

(i) The Fundraiser shall not
guarantee return on investment either expressly or by any implied terms in the
offering document or advertisement material.

 

22. Investors

(a)  Investors may be allowed to invest in companies hosted on
the Crowdfunding Portal subject to the investment limit specified by the Commission
from time to time.

(b)  Investors will be given a cooling off period from the time
of investment until 48 hours to the close of the offer within which they may
withdraw their investment.

(c)  If there is a material adverse change prior to the closing
date of the offer, affecting the project or the Fundraiser, investors may
rescind the investment within 7 days from the date the material adverse change became
public; where the proceeds have not been transferred to the Fundraiser.

(d) Where an investor cancels the offer or agreement to
purchase securities or investment instruments, all funds which may have been
debited from or blocked in the account of the investor shall be refunded or
released within 48 hours of the request to cancel.

 

 

23. Obligations of a
Crowdfunding Portal

The Crowdfunding Intermediary
shall;

(a) Comply with all rules,
regulations, code of conduct, and laws governing capital market operators in
Nigeria;

(b) be knowledgeable about the
general structure, features and risks of investment instruments presented on
its portal;

(c) conduct due diligence on
Fundraisers and their business plans in order to ensure that the Fundraisers
have genuine business ideas;

(d) have the obligation,
following a notification to the Commission, to restrict access of a Fundraiser
to its portal, if it has reason to believe that the Fundraiser or any of its
officers has been convicted of fraud or otherwise raises reasonable suspicions
of fraudulent activity;

(e) verify the financial
condition of the Fundraisers and disclose relevant information on the portal;

(f) prescribe the minimum
threshold for all offers on its portal which shall not be less than 50%;

(g) maintain a list of
investors registered on its portal

(h) maintain a list of investors
that invested in each issuance and amounts invested;

(i) take measures to reduce
the risk of fraud including, but not limited to;

                          
i.         
having a
reasonable basis for believing that a Fundraiser is complying with the
securities laws; and

                        
ii.         
obtaining
background information and regulatory compliance history checks on the
Fundraiser;

(j) review the information
presented by the Fundraiser on its website to ensure that the information adequately
sets out the following:

                          
i.         
General
features and structure of the investment,

                        
ii.         
Fundraiser-specific
risks,

                      
iii.         
Parties
involved and any inherent conflicts of interest, and

                      
iv.         
Intended
use of funds

                        
v.         
Dashboard
showing performance of previous funds raised for non-first timer in addition to
quarterly fact sheets of running investment

(k) facilitate a moderated
interactive forum on the portal for investors and Fundraisers which provides
investors with the opportunity to comment on offers and Fundraisers subject to
the following:

                          
i.         
monitor
postings to confirm that the Fundraiser is not making any statement or
providing information that is inconsistent with the offering document, the
rules of conduct of the portal, or these rules;

                        
ii.         
remove any
material that may contain a statement or information that is false, deceptive,
misleading or that may constitute a misrepresentation or untrue statement of a material
fact;

                      
iii.         
ensure
that Fundraisers respond to questions publicly;

                      
iv.         
not
participate in any communications through the communication channels, apart
from establishing guidelines for communication and removing abusive or
potentially fraudulent communication.

(l) ensure that the Fundraiser
does not guarantee return on investment either expressly or by any implied
terms in the offering document or advertisement material.

 

Part 5 – REQUIREMENTS WITH RESPECT TO TRANSACTIONS

 

24. Receipt of an
application by the Crowdfunding Intermediary

(a) Upon receipt of an
application from an eligible Fundraiser, a Crowdfunding Intermediary shall,
prior to approving the hosting of the offer on its portal, provide
information to the Commission specifying;

(i) Promoters;

(ii) Directors;

(iii) Shareholders,
highlighting holders of 5% and above (directly or indirectly) of the
Fundraisers’ shares;

(iv) Area of business; and

(v) Such other information as
the Crowdfunding Portal deems relevant or as may be required by the Commission.

 

25. Procedure by the
Commission Upon Receiving an application

1.      The Commission may, within 2 working days of receipt of
information from a Crowdfunding Intermediary, if it considers it necessary and
in the interest of the capital market, require a Crowdfunding Intermediary to
provide additional information or prohibit an offering

2.     Prior to directing the Crowdfunding Intermediary to
prohibit an offering, it shall:

(a)  (a)state the reasons;

(b)  direct the Crowdfunding Intermediary to give the eligible
Fundraiser an opportunity to be heard;

(c)  make a decision and communicate the decision, as the case
may be, recommending the appropriate measures that the eligible Fundraiser may
take in order to comply.

 

 

26. The
Offering

(a) A crowdfunding offering
approved by a Crowdfunding Intermediary shall be open for no more than 60 days,
provided that the period may be extended for a further period of not more than
30 days upon such conditions as may be specified by the portal;

 

(b) The Crowdfunding
Intermediary shall adopt an IT System which limits the acceptable amount to the
target amount and reject additional subscriptions once the target amount is
reached.

 

(c) Where a Fundraiser is
unable to meet the prescribed minimum threshold for the target offering amount
within the approved period, the offer shall be withdrawn and the Fundraiser may
only commence a new crowdfunding offering:

(i) not earlier than 30 days
after the said withdrawal; and

(ii) upon demonstrating to the
Crowdfunding Intermediary that all relevant financial and other relevant
information have been updated.

 

(d) In case of any material adverse
change relating to a Fundraiser during the course of an offering, the investors
must be notified of such change within a period of 24 hours after becoming
aware.

 

(e) For an offer to be
successfully completed, the minimum threshold or target amount indicated in the
offering document which must be sufficient to accomplish the business
objectives of the Fundraiser must have been subscribed to

 

(f) Funds raised would only be
released to the Fundraiser if the target amount or the minimum threshold of
funds to be raised is met.

 

(g) Where the funding target
is reached, the Crowdfunding Intermediary shall direct the custodian to make
funds available to the Fundraiser within 24 hours of the end of the offer,
provided that where the Fundraiser is a public company or a public company by
default, the Crowdfunding Intermediary shall require evidence of registration
of the securities with the Commission prior to directing the custodian to
transfer the funds to the Fundraiser (where applicable);

 

(h) Where the amount raised
meets the minimum amount but falls short of the target amount, the Crowdfunding
Intermediary shall direct the custodian to make the funds available to the
Fundraiser upon provision of a revised plan for the proposed use of funds to
the investors and the Crowdfunding Intermediary within one week of the end of
the offer.

Provided that the underlying
project(s) to the proposed use of funds can be downscaled and executed
independently without negatively impacting operations of the Fundraiser.

 

(i) Where the minimum
threshold is not reached at the end of an offer, the Crowdfunding Intermediary
shall effect a refund to all investors within 48 hours;

 

(j) Investors shall have the
right to withdraw any offer or agreement to purchase the investments instruments
up to 48 hours before the closing date stated in the Fundraiser’s offering
materials. After the closing date, an investor is only able to cancel in the
event of a material adverse change to the offering where the proceeds have not
been transferred to the Fundraiser.

 

(k) The ability to cancel
shall be permissible by means of an automated system on the Crowdfunding portal
or by notice to the Crowdfunding intermediary and the Fundraiser;

 

(l) Where the target amount is
reached prior to the expiration of a 90-day period from the date of the opening
of an offer, and a withdrawal occurs which reduces the target amount, the
Crowdfunding Intermediary may permit a re-opening of the offer only for the
balance sum and for a period not exceeding the unexpended period of 90 days.

 

27. Lock-in period

(a) Investors shall not
transfer their investment instrument for a period of one year after allotment
except if a transfer is:

                          
i.         
to the
Fundraiser of the securities or investment instrument;

                        
ii.         
to a
qualified institutional investor/High Net-worth Individual(s); or

                      
iii.         
part of an
offer for sale registered with the Commission;

                      
iv.         
to Retail
Investors registered on the Crowdfunding Portal or to a family member of the
Investor or to a trust created for the benefit of the family member of the
investor or in connection with the death or divorce of the investor or other
similar circumstance.

(b) The Rules of the
Commission on trading in securities of unlisted companies as well as the law on
the restriction on transferability of the shares of a private company shall
apply after the lock-in period;

 

28. Tag-along Rights

(a)  Admission of an equity offer to a Crowdfunding portal shall
be subject to the existence and confirmation of tag-along rights for retail
investors and promoters. The Fundraiser’s articles of association shall provide
for the right of retail investors and promoters to withdraw from the company or
to sell the stake, in the event that controlling shareholders transfer control
of the company to third parties within three years from the conclusion of the
offer.

(b)  Admission of a debt offering to a Crowdfunding Portal shall
be subject to the existence of an early redemption (put) option for all
investors. The offering document and/or any other agreement governing the investment,
shall provide for the right of investors to request for an early redemption of their
investment, in the event that the controlling shareholders transfer control of
the company to third parties within three years from the conclusion of the offer.

 

 

Part 6 – OBLIGATIONS OF THE FUNDRAISER

 

29. A Fundraiser proposing to be hosted on a Crowdfunding
Portal shall submit the relevant information to the Crowdfunding Intermediary including
the following:

(a) information that explains
the key characteristics of the company;

(b) information on the
expertise of its Management

(c) information that explains
the purpose of the offer and the targeted offering amount;

(d) Audited financial
statements or audited statement of affairs of the Company

 

30. Every eligible Fundraiser seeking to raise funds through a
Crowdfunding portal shall issue an offering document.

 

31. The offering document must be short, easy to read,
standardized for comparability and digital friendly by utilising HyperText
links to give easy access to detailed information.

 

32. General Disclosure
Requirements

(a) The offering document
shall disclose the following;

                          
i.         
warnings
to investors

                        
ii.         
the name
and address of the Fundraiser, directors and officers;

                      
iii.         
holders of
more than 5% of the Fundraiser’s equities;

                      
iv.         
description
of the business of the Fundraiser;

                        
v.          
principal
and peculiar risks facing the business of the Fundraiser;

                      
vi.         
copies of
resolutions of the board of the company

                    
vii.         
a
narrative discussion of the financial condition of the Fundraiser.

 

The discussion should address,
to the extent material;

1.      the Fundraiser’s historical results of operations;

2.     its liquidity and capital resources;

3.     how the proceeds from the offering will affect the
Fundraiser’s liquidity; and

4.     whether these funds or any other additional funds are
necessary to the viability of the Fundraiser’s business.

                          
i.         
use of
proceeds;

                        
ii.         
target
offering amount (and a deadline to reach the target offering amount);

                      
iii.         
number and
price of the securities or investment instruments being offered and the
associated obligations;

                      
iv.         
capital
structure and ownership of the Fundraiser;

                        
v.          
risk
factors;

                      
vi.         
information
about an investor’s right to cancel his/her investment;

                    
vii.         
related
party transactions

                  
viii.         
exit
options for investors (which shall be in accordance with the provisions of
these rules, the rules and regulations of the Commission, and applicable companies’ law).

 

 

33. Risk Disclosure

The offering document shall
state all risks associated with the investment without mitigants. This should
include:

      i.         
liquidity
of the securities;

    
ii.         
that it
may be difficult for the investor to resell securities or Investment Instruments
purchased through the Crowdfunding Portal;

  
iii.         
restrictions
on the ability of an investor to cancel the investment;

  
iv.         
the risk
of not getting expected performance on the securities purchased;

    
v.         
risk of
not being able to influence management of the Fundraiser,

  
vi.         
including
minority shareholding disadvantages for corporate action, and the collective
action problem;

 vii.         
dilution
risk; and

viii.         
there is
no guarantee of return on the investment.

 

34. Ongoing disclosure
requirements

(a) Every Fundraiser with a
successful Funding Round on a Crowdfunding Portal shall comply with the following
continuous disclosure requirements:

(i) prompt notification to the
Crowdfunding Intermediary and to the investors in the event of changes and
prescribed documentation as contained in this regulation;

(ii) deliver annual audited
financial statements to the Crowdfunding Intermediary and make them available
to each investor on its website;

(iii) the financial statements
must be accompanied by a notice of the Fundraiser disclosing in reasonable
detail the actual use of the gross proceeds of the offer;

(iv) make available on its
website, the Crowdfunding Portal and by email to each of its investors, a
notice of each of the following events within 24 hours of their occurrence:

1. a discontinuation of the
Fundraiser’s business,

2. a change in the Fundraiser’s
business, or

3. a change of control of the
Fundraiser.

(b) Fundraisers under this
regime are required to provide ongoing disclosure on the issues specified above
until the earliest of the following dates:

(i) the Fundraiser becomes a
reporting Fundraiser (listed on a recognized exchange),

(ii) Fundraiser has completed
a winding up or dissolution,

(iii) the Fundraiser has
redeemed its debt securities,

(iv) the Fundraiser buys back
the securities issued.

 

 

35. Access to offering
and ongoing disclosure documents

All ongoing disclosure
documents must be provided to investors through the Crowdfunding portal, the
website of the Fundraiser and such other reasonable means as may be determined
by the Commission from time to time.

 

36. Marketing and
Communication

a.     A Crowdfunding Intermediary is not prohibited from
advertising the existence of its portal provided that such advertisement is
restricted to general information about the portal and its business model, and
does not include any information on specific offers.

b.     Crowdfunding Intermediaries should ensure that all
marketing communications to investors by Fundraisers are clearly identifiable
as such.

c.     The Crowdfunding Intermediary shall approve all marketing
materials and ensure that marketing materials by Fundraisers comply with the general
rules of the Commission on advertisements.

 

 

PART 7 – RESTRICTIONS

 

37. Prohibited Activities

(a) The Crowdfunding
Intermediary is prohibited from:

(i) providing any financial
assistance to investors for the purpose of investing in an offer hosted on its
portal; or for which it has provided a service; and

(ii) compensating any finder
or introducer for providing the Crowdfunding Intermediary with information
about potential investors.

 

(b) Crowdfunding
Intermediaries and or their managers and officers of their portals are
prohibited from soliciting investments or making recommendations;

 

(c) No Crowdfunding
Intermediary shall intermediate or facilitate secondary trades between buyers
and sellers for investment instruments issued pursuant to these rules.

 

(d) A Crowdfunding
Intermediary is prohibited from utilizing any, website, social media portals,
or third-party portals other than the registered website of the Crowdfunding
Portal for the purpose of facilitating a crowdfunding offering.

 

38. Fundraisers
Prohibitions/Restrictions

(a) Fundraiser shall not
directly or indirectly pay a commission, finders’ fee, referral fees or similar
payment to any person in connection with an offering other than to the
Crowdfunding Intermediary.

(b) This restriction does not
apply to payments to persons as compensation for their services to a Fundraiser
in preparing materials in connection with the offering such as accounting or
legal fees.

(c) The Fundraiser shall not
offer “non-permissible investment instruments”;

(d) The Fundraiser shall not
host an offer concurrently on multiple Crowdfunding Portals;

(e) The Fundraiser is
prohibited from lending or financing or arranging lending or financing for an
investor to purchase Investment Instruments under a Crowdfunding offer.

 

39. Non-permitted
Fundraisers

The following entities are
prohibited from raising funds through a Crowdfunding Portal:

(a)  complex structures;

(b)  public listed companies and their subsidiaries;

(c)  companies with no specific business plan or a blind pool;

(d) companies that propose to use the funds raised to provide
loans or invest in other entities;

(e)  such other entity as may be specified by the Commission.

 

PART 8 – ADDITIONAL REQUIREMENTS FOR COMMODITIES INVESTMENT

PLATFORMS

 

40. Without prejudice to the generality of the foregoing, a
crowdfunding intermediary may operate a commodities investment platform subject
to compliance with the following additional requirements:

 

a) Eligibility: in addition to
the eligibility requirements specified in these rules, the Crowdfunding
Intermediary shall not be registered as a fund manager with the Commission;

 

b) Portal Requirements: The
Crowdfunding Intermediary shall not facilitate on its portal any other
crowdfunding business other than sourcing funds for investments in agriculture
or other commodities:

i. The portal operated by the
Crowdfunding Intermediary for investments in agricultural or commodities
projects shall not be utilised for any other funding or marketing purpose;

ii. A crowdfunding
intermediary registered to operate a Commodities Investments Platform shall not
host a different crowdfunding portal where funds would be sourced for non-
agricultural or commodities projects

 

c) Registration Requirements:
The cash assets ratio requirement for a Crowdfunding Intermediary operating a
Commodities Investment Platform shall, without prejudice to the other
registration requirements specified in these rules, be a minimum of 60% liquid
assets and 40% fixed and other assets;

 

d) Project Hosting: The
Crowdfunding Intermediary shall be eligible to host commodities investment
projects on its Commodities Investments Platform subject to compliance with the
following:

i. Ensure that proper due
diligence is carried out on all projects and project executors or beneficiaries;

ii. Provide investors with the
following information which shall be displayed prominently to investors prior
to making an investment:

1. A Target Plan as defined in
these rules;

2. Location of the proposed
project (s) which shall specify the city, town and local government area of the
relevant state where the project will be located;

3. A disclosure document which
complies with the requirements of Rule 38 as applicable and in addition specifies:

a. total size of land,
quantity of livestock or other measurable feature and total amount required to fund
the hectare with appropriate breakdowns;

b. the kind of title held to
the project site specifying whether host owned, executor owned or leased;

c. information on the
commitments reached with the project executors/beneficiaries;

d. general information regarding
the commodity which shall include the specie(s) to be cultivated, on cost of
production and secured off-takers; where applicable

e. information on the
custodian of the funds to be raised;

f. detailed information on
expected profits from the project and the percentages to be allocated to the executors/beneficiaries,
crowdfunding intermediary and investors;

g. a link to the Terms and
conditions of sponsorship for each project;

 

e) Additional Obligations: The
Crowdfunding Intermediary shall:

i. Ensure that adequate
records on project owners/executors including identification, project location,
membership of relevant association, guarantors and other relevant details are
maintained and disclosed;

ii. Ensure that the Fundraiser
does not guarantee return on investment either expressly or by any implied
terms in the offering document or advertisement materials;

iii. Comply with the
requirements for appointment of a custodian under these rules;

iv. File appropriate returns
to the Commission as indicated in these rules, including information on
compliance with the additional requirements specific to its operations;

v. Where insurance is listed
as a feature of an agriculture or other commodities project, ensure that the
insurance coverage is specific to each agricultural or commodities project and
shall disclose the following:

1) Name of the insurance
company

2) Amount of insurance
coverage

3) Other details of the
insurance coverage

4) Copy of the insurance
policy

 

f) Inspections

i. The operator of the CIP
shall provide investors or their appointed agents with adequate access to
inspect sponsored projects within the project cycle;

ii. Inspections shall be
organised at least once in each quarter of the life cycle of the project;

iii. Investors shall be given
notice of at least 7 days of a proposed joint site visit with other investors,

iv. Requests for individual
site visits by investors or their appointed representatives shall be honoured
within 7 days of such requests subject, to the cost being borne by the
investors;

 

g) Funding Limit: The maximum
amount which may be raised on a Commodities Investment Platform within a
12-month period shall not exceed N1,000,000,000.00 (One Billion Naira) provided
that the Commission may, on application and proper verification, grant approval
to exceed the specified amount.

 

PART 9 – MISCELLANEOUS

41. An Organization or Association may approach the Commission,
for the purpose of supervising registered Crowdfunding Intermediaries, to
register an independent Industry Association as a Self-Regulatory Organization
or Trade Association.

 

PART 10 – PENALTY

42. Any crowdfunding intermediary that fails to comply with
these rules shall be liable to a fine of not less than N100,000.00 (One Hundred
Thousand Naira Only) and the sum of N5,000.00 (Five Thousand Naira Only) for
every day the violation continues and shall in addition be liable for any loss
of investor funds arising due to the Crowdfunding Intermediary’s failure to
comply with its obligations under these rules.

 

PART 11 – TRANSITIONAL PROVISION

43. Every person/entity operating a crowdfunding portal/digital
commodities

investment platform prior to
the commencement of these rules shall restructure its

operations in compliance with
these rules and apply for registration no later than 90

days from the effective date
of these rules.

Schedule 1

Registration Forms

1. Duly Executed Form SEC 3 – For the Company

2. Form SEC 2 and 2D – Sponsored Individuals/Compliance Officer

3. Form SEC 2 and 2D – Directors of the Company

 

Registration Fees

1. Evidence of Payment of Filing/Application Fee – N50,000 (Fifty Thousand Naira);

2. Evidence of Payment of Processing Fee – N200,000 (Two Hundred Thousand Naira);

3. Evidence of Payment of Registration Fee – N500,000 (Five Hundred Thousand Naira);

4. Evidence of Payment of Sponsored Individual Fee – N50,000 (Fifty Thousand Naira) for each sponsored
individual.

 

Schedule 2

Transaction Fees

1. The total fees payable to
parties to a crowdfunding issue shall not exceed 5% of the total funds raised.

2. Fees payable by the
Crowdfunding Intermediary to the Commission shall be 5% of the annual turnover
of the Crowdfunding Intermediary.

 

B. SUNDRY AMENDMENTS

1. Name/citation of the
Rule to be Amended – Contents of a Trust Deed/465(d)&(e)

Full
Text of the Existing Rules –

(e) investment policy,
including investment outlets;

Proposed
Amendment –

(e) investment policy,
including investment outlets and target asset allocation stated within a range;
provided that a scheme shall not hold more than 5% in cash and cash equivalent
instruments. For the purpose of this rule, cash equivalent instruments mean
call accounts and instruments with a tenor not exceeding 7 days;

 

2. Name/citation of the
Rule to be Amended – Investment by Collective Investment Schemes in Unlisted
Securities / Additional Disclosure /497

Full Text of the Existing
Rule –

(3)
Additional Disclosure

A Fund Manager seeking to
invest assets of a Fund in unlisted securities shall disclose:

Proposed
Amendment –

(3)
Additional Disclosure

A Fund Manager seeking to
invest assets of a Fund in unlisted securities shall disclose

in the Fund’s prospectus (at
inception) and on the Fund Manager’s website (on an ongoing basis):

 

3. Name/citation of the
Rule to be Amended – Amount to be Underwritten/Rule

517; Time Amount
Underwritten is to be made available/ Rule 519

Full
Text of the Existing Rule –

517.
Amount to be Underwritten

52

(i) Where the issue is
underwritten, the amount or percentage of the issue underwritten by any
Underwriter shall not be less than 35% of the number of units issued for
subscription.

(ii) The level of underwriting
commitment by a single underwriter at any time shall not be more than 3 times
its shareholders funds.

519.
Time Amount Underwritten is to be made available

The underwriter(s) shall make
the amount underwritten available to the issuer on the day the offer opens

Proposed
Amendment – Deletion of 519 and Merging Same into 517 to

read
as follows: Amount to be Underwritten and Disclosure Time

(517)
Amount to be Underwritten and Disclosure Time

(i) Where the issue is
underwritten, the amount or percentage of the issue underwritten by any
Underwriter shall not be less than 35% of the number of units issued for
subscription.

(ii) The level of underwriting
commitment by a single underwriter at any time shall

not be more than 3 times its
shareholders funds.

(iii) The underwriter(s) shall
make the amount underwritten available to the issuer

on the day the offer opens

 

4. Name/citation of the
Rule to be Amended – Valuation Report / Rule 522

Full
Text of the Existing Rule –

(i) The Valuation report for a
new application shall be valid for nine months from the date of the valuation

(ii) A valuation report of the
REICO’s real estate shall be filed with the Commission annually by a real estate
valuer registered with the Commission in line with a recognised Valuation
Standard.

Proposed
Amendment –

(k)
Rating and Valuation Reports

(i) A rating report by a
registered rating agency shall be filed with the Commission every two (2)
years.

(ii) The Valuation report for
a new application shall be valid for nine months from the date of the valuation.

 

 Proshare Nigeria Pvt. Ltd.

 

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 Proshare Nigeria Pvt. Ltd.

 

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 Proshare Nigeria Pvt. Ltd.

 

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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


I'm business helper , i have 20 year experience in business management sector. I help many business owners to grow business. My passion is helping fellow entrepreneurs and small business owners succeed.

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