SEC Warns Against Unregistered Investments Crowdfunding Platforms

The Securities and Exchange Commission (SEC), on Thursday reiterated its earlier warning against activities of unregistered investments crowdfunding platforms.

Crowdfunding is the process of raising funds to finance a project or business from the public through an online platform, while crowdfunding portal is a website, portal, intermediary portal, application, other similar modules that facilitates interaction between fundraisers and the investing public.

In a Circular released August 3, 2022, the commission expressed concerns over the fraudulent activities of some unregistered investment crowdfunding platforms and hereby strongly advise the investing public against making investments with or through any crowdfunding platform not registered with the Commission.

The commission said in recognition of the potentials and importance of crowdfunding platforms and the need to protect investors through effective regulation, it had in January 2021 published its crowdfunding rules and requested well-intending crowdfunding platforms to register with the Commission and comply with the Rules by June 30, 2021.

According to the circular, “the commission by this circular hereby notifies the general public and operators of unregistered crowdfunding platforms, that operating any crowdfunding platform that is not registered by the commission is illegal and may lead to prosecution of such operators and loss of investment by their clients.

“Members of the public are further advised to confirm the registration status of any entity soliciting their participation in any investment scheme by contacting the Commission through its website:, e-mail:, Phone no: 09-4621168”.

The commission had in the recently released rules on Crowdfunding, said, “A proposed rule has been developed to provide a regulatory framework permitting private companies with the required structure and mechanism in place to raise capital from the public through crowdfunding.”

It noted that Micro, Small and Medium Enterprises (MSMEs) incorporated as a company in Nigeria with a minimum of two-years operating track record should be eligible to raise funds through a crowdfunding portal registered by the commission.

According to the commission, total fees payable to parties to a crowdfunding issue shall not exceed two percent of the total funds raised, adding that the maximum amount which might be raised by a medium enterprise shall not exceed N100m.

“The maximum amount which may be raised by a small enterprise shall not exceed N70m; and the maximum amount which may be raised by a micro-enterprise shall not exceed N50m.

The limits set forth above shall not apply to MSMEs operating as digital commodities investment platforms or such other MSMEs as may be designated by the commission from time to time,” it said.

The commission explained that retail investors might not invest more than 10 per cent of their annual income in a calendar year.

According to the rule, crowdfunding portal that is located outside Nigeria will be considered as actively targeting Nigerian investors, if the operator or the operator’s representative, promotes directly or indirectly the platform in Nigeria.

It stated that a crowdfunding portal might be registered and operated only by an operator registered with SEC as a Crowdfunding Intermediary.

The rule added that only entities registered with the Commission as an Exchange, dealer, broker, broker/dealer or alternative trading facility as prescribed under the Act and the SEC Rules and Regulations might be registered as a Crowdfunding Intermediary.

It added that crowdfunding portal or crowdfunding intermediary that failed to comply with the rules shall be liable to a fine of not less than N1 million and the sum of N10,000 for every day the violation continues.