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Ponzi Schemes Can’t Deliver On Promises, Threaten Investor Protection- AGF, SEC DG

Director General of the Securities and Exchange Commission, Lamido Yuguda, on Tuesday lamented that the devastating impact of the Covid-19 pandemic on the Nigerian economy, the low-interest rate environment, and the increased use of online services for interactions and transactions, has helped the proliferation of Ponzi schemes in the country.

Speaking at the opening of a two-day webinar organised by the Attorney General Alliance-Africa in collaboration with the commission on Tuesday, Yuguda described the continued activities of Ponzi schemes as a threat to its job of investor protection.

According to him, the schemes are also against the functioning of a fair and orderly financial market, as well as the development of the economy at large, noting that Ponzi scheme operators have capitalized on the harsh economic climate to offer unrealistic returns on investment to unsuspecting investors.

These illegal schemes, he stressed, have also succeeded in luring new investors to expand their operations through the increased use of online services, restating the commission’s statutory duty to promote investor education and the training of capital market operators.

The capacity building webinar, he continued, was organized in furtherance of that statutory mandate, and “will afford participants the opportunity to learn contemporary and innovative ways of combating and curbing the menace of Ponzi schemes in Nigeria.

“I believe the knowledge gathered from this programme will provide participants new ways of approaching, assessing and tackling the growing problem of Ponzi Schemes”.

He described the theme of the programme as apt, and its organization timely, in view of the contemporary challenges confronting the Nigerian financial sector and its regulators, by the activities of Ponzi Schemes.

“The pervasiveness of Ponzi schemes undermines regulatory efforts in developing the capital market, and also negatively impacts investor confidence.

“Ponzi schemes operate with unsustainable operating models that ultimately lead to huge losses for investors. Following the collapse of the MMM Ponzi scheme, the Nigerian Deposit Insurance Corporation (NDIC) had estimated that over three million Nigerians lost about N18bn. Several other illegal investment schemes have cost Nigerians their assets and life savings” he stated.

The SEC boss said the Commission’s efforts in addressing Ponzi schemes are therefore geared towards investor protection and preserving market integrity, emphasising that the Nigerian capital market should be a safe destination for investors.

He assured that the SEC will continue to apply innovative measures to combat the activities of Ponzi schemes while seeking the cooperation of relevant stakeholders.

Also speaking, Abubakar Malami, Attorney General of the Federation and Minister of Justice, said there is no underlying investment fundamentals in Ponzi schemes, the reason they can never deliver on promised returns.

Such schemes, he continued, are different from legitimate investment opportunities, because the perpetrators are simply fraudsters who take advantage of even the wealthy, intelligent, the sophisticated people.

“They are usually people who are very good at what they do and they thrive on trust and friendship promising easy cash in the short term and financial succour to the naïve.  Ponzi scheme is an operational, social and economic risk and the fight against it is now a war, and in fact a full blown war. It is everywhere, not peculiar to us.

“The investment climate is not simplistic, it can be highly sophisticated and that is why the law regulates the space to ensure that the requisite duty of care by operators is not breached in any way, that there is a proper disclosure as required by law and that there is a generally level playing field for all stakeholders” he added.

Malami added that the nation has relevant laws to ensure that offenders are punished, stating that the government is doing its best to tackle economic problems and committed to ensuring that Nigerians are lifted from poverty through a number of incentive-based loans and a number of programmes.

In his own remark, Markus Green, AGA-Africa Board Member, stressed that due to the pandemic, many businesses have migrated to online operation, a situation that criminals have unfortunately taken advantage to lure people into Ponzi schemes. The seminar, he said, will build capacity on how to track these schemes, apprehend the perpetrators and prosecute them.

“We bring in experts from the United States to combine with others in Africa for training on these activities and how to curb them. COVID-19 has changed the way we do business but it has not stopped us from our work,” he stressed further.

Caption: From left, Kano State Commissioner for Justice, Barr Musa Abdulahi Lawan; Executive Commissioner Legal and Enforcement, Securities and Exchange Commission, Reginald Karawusa; and a Legal Practitioner, Barr Ibrahim Aliu Nasarawa; during a Sensitization Seminar on Curbing the Tide of Ponzi Schemes: The Role of the Regulator Webinar in Abuja on Tuesday.

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