Aligning the rules on crowdfunding 2021 with the existing legal framework regulating Nigeria's securities market

Abstract

To a large extent, the relatively recent introduction of web-based crowdfunding into Nigeria’s capital market space and its wide patronage by micro, small and medium enterprises (MSMEs), has lessened the conundrum associated with accessing investment funds by Startups and MSMEs in Nigeria. Sadly, despite the prominence, this laudable development is without statutory backing. The absence of a legal framework poses some measure of risk for investors as well as regulatory challenges. One nagging truism is that legislation in Nigeria usually lags heavily behind developments. Thus, to cure the regulatory gap, the Securities and Exchange Commission (SEC) in protection of the investing public and to provide regulators with legal tools to regulate the use of investment-based crowdfunding in Nigeria made the Rules on Crowdfunding 2021. This article interrogates the extent to which the existing principal statutes regulating the Nigerian capital market sanction the use of financial instruments of the nature of investment-based crowdfunding to raise capital by MSMEs and the validity of the SEC Rules on Crowdfunding 2021 vis-à-vis the statutes.