N18 Billion Ponzi Fraud: SEC Caution Investors On High Yielding Investment Schemes

Against investors’ quest for higher yielding investment schemes, the Securities and Exchange Commission (SEC), has warned that, it’s majorly a ploy by Ponzi scheme operators at deceiving unsuspecting investors and defrauding them of their money.

Also, the Commission has reiterated its zero tolerance for infraction in the domestic capital market, noting that, it will not hesitate to deal decisively with any operator who carries out any activities outside the function(s) approved for it by the Commission.

Ponzi schemes are fraudulent investing scams which generate returns for early investors with money taken from later investors. They are similar to pyramid schemes in that both are based on using new investors’ funds to pay the earlier backers.

SEC DG Mr. Lamido Yuguda

Addressing the media community on Friday during a virtual meeting, after its 2nd post Capital Market Committee Meeting (CMC) for the year, held on Thursday, the SEC Director-General, Mr. Lamido Yuguda said the menace of Ponzi scheme has become a hydra headed economic albatross that must not be allowed to thrive.

It will be recall that, following the collapse of the MMM Ponzi scheme, the Nigerian Deposit Insurance Corporation had estimated that over three million Nigerians lost about N18billion over three million Nigerians have lost about N18billion through Ponzi schemes.

The SEC DG who said Ponzi schemes operate with unsustainable operating models that ultimately lead to huge losses for investors, noted that, a two minutes check on the commissions’ website would have saved investors the huge investment loss.

According to Yuguda, “the Commission continues its campaign against illegal operators in the capital market, especially Ponzi Schemes and has adopted multi-level engagements with media platforms and regulators of publicity agencies in order to curb the reach and activities of these illegal operators. While we continue our activities to resolve the complaints that have been forwarded to the Commission through the official channels, it is important to reiterate to the investing public to be wary of unscrupulous schemes that promise unrealistic returns on investment.”

“We will like to use this opportunity to reiterate our commitment towards zero tolerance for market infractions. We urge every capital market operator to operate within the market functions approved for it by the Commission. The Commission will not hesitate to deal decisively with any operator who carries out any activities outside the function(s) approved for it by the Commission. No capital market can grow without discipline and adherence to laid down Rules and Regulations.

Speaking on the unclaimed dividend in the capital market, the SEC DG who frowned at the current value which stood at N170 billion up from N158 billion in 2019, despite the Commission’s drive to reduce the numbers, explained that poor identity management, multiple subscriptions of investors and period of lockdown of the economy during the Covid 19 pandemic contributed to the increase.

He said as part of measures to increase the number of mandated investors on the e-DMMS and reduce the quantum of unclaimed dividends, members of the CMC adopted the following measures:

i. Automation for mandating to e-DMMS

ii. Increase monitoring of adherence to procedures

iii. Increase awareness campaigns on the initiative


iv. A training session to be organized by the Central Securities Clearing System (CSCS); who will be supported by the e-DMMS technical committee, institute of Capital Market Registrars (ICMR) and Association of Securities Dealing Houses of Nigeria (ASHON).

v. Conduct of a study to determine the suitability of the CSCS to process dividends of investors in unlisted companies.

On other major highlights of the CMC meeting, Yaguda said “the Commission recently issued a circular to the public on the commencement of its Regulatory incubation process.  I am glad to inform you that the Commission has registered two Fintech Capital Market Operators, which include a Digital Fund Portfolio Manager and a Digital Sub-broker. We look forward to registering more Fintech players in our market.

“The Commission has approved some derivative contracts, developed the regulatory framework for derivatives tradingas well as rules on Interoperability of Central Securities Depositories in Nigeria. We have also registered some Central Counterparty Clearing Houses (CCP). Furthermore, we wish to reiterate our stance on mandatory compliance with the Crowdfunding Rules as violators would be adequately sanctioned.

“As part of measures to deepen the commodities ecosystem, the Commission held engagements with the National Insurance Commission (NAICOM) towards de-risking and insuring certain commodity assets, which we believe will attract more investments within the space, particularly from the Pensions industry. A technical committee was also constituted comprising representatives of the Commission, Standards Organization of Nigeria (SON), AFEX, Lagos Commodities and Futures Exchange (LCFE) & Nigerian Commodities Exchange (NCX) to deliver agro-based standards within 3 months.

“To develop an effective price discovery mechanism for the commodities ecosystem, the Commission has equally solicited the support of the National Bureau of Statistics(NBS). A technical committee has been constituted for this purpose with the mandate of developing modalities for this exercise.

“In June 2021 the Commission constituted a Committee on Identity Management for the Nigerian Capital Market. The committee is chaired by Mr. Aigboje Aig-Imoukhuede and is expected to harmonize various databases of investors, and facilitate data accuracy in the market. We are optimistic that the outcome of this committee’s assignment would address the challenges of identity management and help resolve some of the issues we face in the areas of unclaimed dividend, direct cash settlement and multiple subscriptions.

“It would interest the market to note that the Commission has recently extended the due date for renewal of registration. Consequently, the registration portal has been reopened until August 31, 2021. This is to enable operators that are yet to update their information with the Commission do so before the end of the new deadline.

“Furthermore, the Federal Inland Revenue Services (FIRS) has proposed the guideline for tax neutrality of non-interest instruments. It is expected that the document would become effective before the end of the year to help further deepen the non-interest segment of the market.

“Tremendous progress has been made with regards to securing the passage of the securitization bill. The commission is working closely with the FSS 2020 to adopt an approach that would ensure smooth passage of the bill.

“The Commission acknowledges the critical role the capital market can play in long term financing of infrastructure in the country and will continue to work with relevant stakeholders to unlock the use of capital market instruments in funding key infrastructure needs especially in roads, housing and clean energy”, he added.

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