Fintech company Chaka has become the first company to receive the digital sub-broker license from the Nigerian Securities and Exchange Commission (SEC). Chaka provides a global trading and investment platform which allows users to invest in stocks listed in NASDAQ, the New York Stock Exchange, amongst others. The license received from the SEC, Nigeria, allows Chakra to operate its digital platform for buying and selling stocks in the country.
Chaka’s license from the SEC comes after months of regulatory kerfuffle induced by the Nigerian Securities and Exchange Commission. On the 19th of December, 2020, the SEC published a statement which stated orders from the Investment and Securities Tribunal (ITS), restricting Chaka and other digital platforms, from offering its services. The SEC highlighted that digital platforms that offer the purchase of shares, such as Chaka, acted outside its regulatory purview and breached extant laws and regulations. The new development on the part of the SEC threw such fintech companies aflutter, and created worries in the minds of Nigerians who used the platforms, especially those who had purchased large amounts of shares.
On the 22nd of April 2021, SEC released amendments to their Consolidated Rules and Regulations. As part of a major amendment to its Consolidated Rules and Regulations, SEC recognized sub-brokers who use digital platforms to serve multiple brokers. Companies such as Chaka could now operate. A new definition for sub-brokers was provided in the SEC’s amendments. A sub-broker was defined as “as any person or entity not being a dealing member of an exchange who acts on behalf of a sponsoring broker/dealer as an agent or otherwise for assisting the investors in buying, selling, or dealing in securities through such sponsoring broker/dealer”. Noteworthily, the amendment also stated that “a sub-broker who is serving multiple brokers through a Digital Platform is a sub-broker who utilizes a digital platform to serve clients and interact with the sponsoring broker or brokers”.
Tosin Osibodu – Chaka’s CEO, described the process of acquiring the sub-broker license as one that required prodigious efforts. According to him, Chaka continues to be committed to providing clarity to the stock market, while complying with SEC regulations. Although Chaka’s CEO – Tosin Osibodu made no mention of what it cost the company financially to acquire the license, it is quite obvious that the license did not come at no cost.
According to the SEC’s recent amendment, a sub-broker license for digital platforms involves a minimum capital of ₦10 million and a Fidelity Bond covering at least 20% of the minimum capital. Other requirements include four separate fees totalling ₦500,000, several SEC forms, company documents, and other documentation about people involved with the company. Digital sub-brokers are also required to fully describe the technology that their infrastructure is built on, including details about security, backup, and recovery processes.
Chaka’s acquisition of an official license now places the company directly under SEC’s supervision. Until now, the company’s operations were based on a partnership with Citi Investment Capital Ltd.
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