History has it that crowdfunding has been in place since the Statue of Liberty. In order to complete the pedestal of the great piece of art, the American Committee of the Statue of Liberty was tasked to raise money and they did through crowdfunding[1].

With the growth of the internet, and the launch of platforms like Kickstarter and Zoopa, crowdfunding has spread across the globe and has evolved into different variations like charity or donation-based crowdfunding and equity-based crowdfunding.

Due to the nature of equity-based crowdfunding, which is essentially offering security to the general public on an online platform, the regulators of the capital markets and investments have to keep a close eye on equity-based crowdfunding.

The Nigerian Securities and Exchange Commission (“SEC”), in a bid to regulate investments and securities business in Nigeria and pursuant to section 13 (a) of the Investment and Securities Act 2007, issued its Rules on Crowdfunding (the “Rules”)[2] on 21 January 2021. We explored the provisions of the Rules in our previous article which can be accessed here[3].

Part 11, paragraph 43 of the Rules states that

“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 (emphasis ours) from the effective date of these rules.”

This means that investment-based crowdfunding portals or investment platforms should have complied with the Rules and registered with SEC before 21 April 2021 (emphasis ours).

However, SEC seems to have extended the date for the Rules to take effect in its publication released on 26 May 2021[4].

In its publication, SEC directed all existing investment crowdfunding portals/digital commodities investment platforms to note the requirements and eligibility criteria for raising funds through and/or operating a Crowdfunding Portal and comply with the registration requirements or cease operations by 30 June 2021 (emphasis ours). Failure to comply before the effective date would render any operation by an unregistered and non-compliant platform illegal and will attract regulatory sanctions as provided in the Rules.

Investment Platforms, Investment-based crowdfunding platforms, and digital commodities investment platforms are advised to comply with the Rules and register on SEC’s portal which can be accessed

[1] “The Statue of Liberty and America’s crowdfunding pioneer” by BBC accessed 31 May 2021. https://www.bbc.com/news/magazine-21932675

[2] The Rules can be accessed here.

[3]

[4] “Effective Date of the Crowdfunding Rules” by SEC Nigeria accessed 31 May 2021.  https://sec.gov.ng/effective-date-of-the-crowdfunding-rules/.