To reduce the proliferation of illegal investment outfits and ensure that the apex regulator is well equipped to stem the tide, the National Assembly is proposing a bill that will empower the Securities and Exchange Commission (SEC) to impose stiffer punishment on promoters of Ponzi schemes and other unregistered investment schemes.
This is part of an amendment to the Investment and Securities Act 2007, being proposed by the House of Representatives.
The bill, which went through second reading on Thursday at the House of Representatives, was proposed by Babangida Ibrahim representing MalumFashi/Kafur Federal Constituency, Katsina State.
According to Ibrahim, there have been a lot of complaints by Nigerians on the activities of illegal investment schemes that promise unreasonably high returns but rather fleece Nigerians of their hard-earned money.
Under the document – ‘A bill to repeal the Investment and Securities Act 2007 and to enact the Investments and Securities Act, 2021’ – SEC will be empowered to address the challenges of Ponzi schemes.
Section 195 (1) of the bill empowers SEC thus: “The Commission shall have the power to enter and seal up all prohibited schemes and shall obtain an Order of court to freeze and forfeit all assets of such schemes to the Federal Government of Nigeria.”
It notes, “The cost and expenses incurred under subsection (1) above shall be a first charge from the funds and properties of the illegal scheme including assets of its owners, promoters and or managers, whether acquired legitimately or otherwise.”
“For this bill, ‘prohibited scheme’ including those commonly known as a ‘Ponzi or Pyramid scheme’ means: (a) Any investment scheme that pays existing contributors with funds collected from new contributors to the scheme promising high returns with little or no risk: i) Whether or not the scheme limits the number of persons who may participate therein, either expressly or by the application of conditions affecting the eligibility of a person to enter into, or receive compensation under the scheme; or ii) Whether the scheme is operated at a physical address or through the internet or other electronic means. (b) Any scheme where participants attempt to make money by recruiting new participants usually where: (i) the promoter promises a high return in a short period of time, and (ii) no genuine product or service is sold; or (iii) the primary emphasis is on recruiting new participants,” it states.
A section seeks to increase the period within which a compensation claim could be made for the Investor Protection Fund (IPF) to six years from the date of occurrence of the defalcation, revocation, cancellation, insolvency or bankruptcy of a dealing firm.
The time frame in the current Act is six months.