The Securities and Exchange Commission’s (SEC) plan to roll out a USSD-based verification system for capital market operators deserves both attention and support. For decades, Nigeria’s capital markets have suffered repeated blows from unlicensed operators and the shadow economy of Ponzi schemes. By providing a simple, non-internet verification tool, the regulator is arming millions of Nigerians with a frontline defence against fraud. Anyone with a basic mobile handset will soon be able to confirm, in seconds, the registration status of anyone claiming to be a broker, adviser or investment manager.
This move is not merely about convenience; it reflects the SEC’s deeper recognition that information asymmetry is the seedbed of financial scams. Countless Nigerians have lost life savings to schemes promising implausible returns, often endorsed by celebrities or amplified through social media. The USSD system aims to make trust verifiable in real time, offering an easy, no-cost check for citizens who may not have access to smartphones or the internet. It is a particularly important step in a country where smartphone penetration remains below 50 per cent, and where rural populations are often most vulnerable to financial predators.
As enforcement gears up, the recently enacted Investments and Securities Act (ISA) 2025 arms the Securities and Exchange Commission with unprecedented investigative powers. The SEC may now seek court orders to freeze and confiscate assets of prohibited schemes and may even enter and seal their premises. Prohibited scheme operators face minimum penalties of ₦20 million or ten years in prison, or both, with provisions for disgorgement to recover defrauded funds.
Beyond fraud suppression, ISA 2025 tightens controls on corporate conduct. It mandates SEC approval for takeovers of companies where voting rights exceed 30 per cent. It also criminalises misappropriation of client assets by trustees, fund managers or custodians. Conviction carries a fine of at least ₦50 million and interest-bearing restitution. Such measures aim to build trust in collective investment schemes, a sector previously plagued by opacity.
In addition, ISA 2025 brings Nigeria a step closer to international best practice by formally recognising virtual assets, such as cryptocurrency, within the legal definition of securities. Virtual asset service providers must now register with SEC and comply with disclosure and governance rules, while foreign collective investment vehicles targeting Nigerians must obtain prior approval.
On investor protection, new mechanisms have been introduced. Securities exchanges must now establish an Investor Protection Fund to compensate victims of insolvency, fraud or license revocation. The approach is robust: private operators are held to high standards, and retail investors are formally shielded from the fallout of market defaults, an essential foundation for a credible capital ecosystem.
However, technological solutions are no silver bullet. Criminal syndicates are often adaptive, and the same tools that empower investors can be manipulated by fraudsters. Regulatory vigilance, timely public education, and decisive enforcement remain critical. Incorporating capital market literacy into school curricula, as the SEC intends, may be one of the most sustainable ways to build financial resilience across generations.
For the SEC, the challenge will be ensuring that the USSD system works seamlessly from the outset. Nigerians will not tolerate a tool that is slow, unreliable or easily circumvented. Effective communication campaigns are also essential, to make citizens aware of the service and to build trust in its results.
Financial scams erode not only household savings but also broader confidence in the capital markets. The SEC’s USSD initiative, supported by the strengthened provisions of ISA 2025, offers a path towards a safer and more transparent investment environment. If executed with rigour and integrity, it could mark a turning point in Nigeria’s long battle against financial fraud.