SEC to operators: Embrace innovation — but remain vigilant of its risks

The Securities and Exchange Commission (SEC) has urged capital market operators to embrace innovation and remain vigilant of its risks.

Emomotimi Agama, director-general of the SEC, spoke at the 2024 annual business summit of the Capital Market Solicitors Association recently held in Lagos.

The event was themed, ‘Revolutionising the Nigerian Capital Market through Innovative Financial Instruments for Sustainable Development’.

Speaking during his keynote address, Agama said such risks include cybersecurity threats, regulatory complexities, and market volatility.

The SEC DG urged stakeholders in the capital market to embrace innovation as a driver of expansion, improved productivity, greater transparency, and resilience.

He said the SEC is aware of the new financial products and services that are emerging due to technology and is committed to modifying its regulations to address these innovations.

“The Commission has a three-pronged approach to regulating innovation: safety, market deepening, and solutions to problems. This has always, and will continue to help create a more efficient and reliable capital market ecosystem,” Agama said.

“In the efforts to support the innovation and growth in the market, the SEC had established a programme of assessment called Regulatory Incubation to help new FinTech businesses.

“The programme allows them to operate for one year within a highly fortified and limited regulatory perimeter while the SEC develops applicable rules that address these innovative technologies.”

The incubation programme, Agama said, helps ensure investor protection and market stability while also fostering financial technology advancements in the Nigerian capital market.

The SEC DG said one of the main objectives of the revised capital market master plan (CMMP 2021-2025) is to leverage technology and innovation to expand the depth and breadth of the capital market — allowing it to contribute significantly to national economic development.

“In order to facilitate the success of the RCMMP, a major task before the Securities and Exchange Commission, is creating an enabling regulatory and supervisory environment for innovation to thrive as means of deepening the Nigerian Capital Market in terms of new products & processes,” he said.

“While the potential of innovation is undeniable, embracing it also comes with challenges.

“Hence, we must be mindful that exploration of new instruments must be balanced with robust risk management frameworks. The SEC will ensure appropriate safeguards are in place to protect investors and maintain market stability.

“Investor confidence is the bedrock of any successful market. Fostering trust in innovative instruments through transparency and clear communication will be key.”

He added that the success of the initiatives demands collaboration by all stakeholders, saying they must create a platform for open dialogue and continuous improvement.