SEC Rules For FinTechs

Released on August 30, 2021, this document sets out the regulatory regime for digital (Robo) Advisory Services, ensuring that algorithm-driven advice meets investor-protection, governance and operational-risk standards.

• Provides detailed definitions—“Digital Advisory Services,” “Robo Adviser,” “Rebalancing,” “Recommended Portfolio,” and “Fully Automated Robo Advisers”—aligning with the Investments and Securities Act.
• Registration Requirements: Robo Advisers must comply with existing Adviser rules (Forms SEC 2/2D), maintain a minimum capital base, and lodge a fidelity bond; third-party tech providers need not register but must pass due diligence.
• Operational Controls: Mandates pre-launch and ongoing audits of algorithms, written rebalancing policies, client consent for portfolio changes, and periodic independent technology reviews.
• Governance & Risk Management: Boards and senior management must oversee algorithm development, change-management, back-testing, bias controls, cybersecurity and business-continuity plans.
• Client Protections: Requires clear disclosures of algorithm assumptions/limitations, conflicts of interest, risk-warning statements for overseas products, suitability assessments (CKA/CAR), and strict data-privacy/AML controls.

Released on April 22, 2021, this document brings substantial changes to the existing Rules and Regulations of the SEC, enhancing oversight of sub-broker activities and transaction record-keeping, and introducing provisions for digital sub-brokers.

• Rule 67 (Sub-Broker): Expanded to define “Sub-broker Serving Multiple Brokers Through a Digital Platform,” with new capital, fee and documentation requirements for digital intermediaries.
• Rule 70 (Records): Amended to require digital intermediaries to retain proof of trade execution, money-transfer receipts, all client communications and full transaction logs on their platforms.
• New Rule 76: Establishes governance standards for digital sub-brokers, including technology risk policies, security certifications, client suitability notifications and prohibitions on delegating functions without SEC approval.

Released on January 21, 2021, this document establishes the comprehensive regulatory framework for investment-based crowdfunding in Nigeria’s capital market. It sets out definitions, eligibility thresholds and operational requirements to ensure that small and medium-sized enterprises can access funding while protecting investors.

• Definitions and scope are clarified up front, covering terms such as “Crowdfunding Portal,” “Crowdfunding Intermediary,” “Fundraiser,” and “Investment Instruments”.
• Only incorporated MSMEs with at least two years’ track record—or those with a strong technical partner—may raise up to ₦100 million (medium), ₦70 million (small) or ₦50 million (micro) per 12 months, with retail investors capped at 10% of annual net income.
• Crowdfunding must be conducted through a registered Intermediary portal that meets stringent registration requirements—certified incorporation documents, audited accounts, operational manuals, minimum capital, fidelity bond, and sponsored-individual governance.
• Intermediaries must maintain robust due-diligence frameworks, KYC/AML controls, secure IT infrastructure, and separate trust accounts with custodian banks for each funding round.
• Ongoing obligations include investor education, monthly and quarterly reporting to the SEC, data-protection safeguards, annual filings, and clear, plain-English warning statements and risk acknowledgments for all investors.