Digital stock trading company Chaka has laid the groundwork for other digital stock trading platforms by becoming the first startup in Nigeria to receive SEC license for digital stock trading.

Chaka has been going back and forth for several months with the Nigerian Securities and Exchange Commission (SEC) regarding regulations; the investment startup has now received a license from the Commission to operate its digital platform for buying and selling stocks in the country.

You should know that Chaka was the first digital stock trading company to acquire the digital sub-broker licence introduced and issued by SEC in April 2021, after the commission declared all stock investment operations in the country illegal. The sub-broker licence was an adjustment to the commission’s rules and regulations

What is Chaka?

Founded in January 2019 by Tosin Osibodu with Olaolu Ajose as the chief technology officer. Chaka is a digital stock trading app that gives instant access to over 4000+ stocks & ETFs on the Nigerian Stock Exchange, New York Stock Exchange, and NASDAQ.

You can Invest in publicly traded companies like Apple, MTN, & Dangote. Own assets in dollars and naira. Earn dividends on your investment.

What the licence mean

On the 19th of December 2020, the SEC released directives to all investment platforms. The ban directly affected Chaka from offering its services in Nigeria. In the statement, the SEC said that Chaka and other stock trading platform was functioning outside the regulatory purview of the Commission and without requisite registration, as stipulated by the Investment and Securities Act 2007.”

Read more: Top 10 impact investing companies in Africa.

From that moment Chaka stopped all it’s investment operations and decided to engage the SEC to forge a lasting solution. Fast forward to this time, the new licence now bestows full regulatory licence to Chaka and will see the investment startup operate in tenet with the provisions of the commission.

But before now, how has Chaka been offering it’s services? The investment platform, unlike many others in the country, offered investment through a 3rd party partnership with a Nigerian based broker known as Citi investment Capital ltd (CICL). Chaka operated under the umbrella of this licenced broker.

At this time, it is still unclear if the stock trading startup is licenced to provide foreign stocks, However, Chaka received its licence from SEC and is now fully authorised as a digital stock trading platform in Nigeria, that part is crystal clear.

Speaking on the new achievement during a press release, the CEO Tosin Osibodu, explains that the acquisition took a tremendous amount of effort and is definitely the fruit of consistent engagement with the capital markets regulator.

We’ve built a great relationship [with SEC] that we think will be beneficial for the whole ecosystem moving forward,” Osibodu said.

What this licence also means is that Chaka can also help other stockbroking firms create digital presence in Nigeria.

How digital stock trading work

You may want to ask how does digital stock trading work? Who can have access to this platform, do you need any technical knowledge on stock trading?Is it legal to trade stock especially in Nigeria?. Let’s try to answer some of these questions here.

Anyone with an internet-enabled smartphone can have access to most digital stock trading platforms in Nigeria, and you do not need to have prior investment knowledge, you only need basic knowledge and there are resources on the platform to guide you while investing. You need to download the app, sign up and begin investing with as little as $2 or ₦1,000.

SEC Requirements

According to the SEC’s recent amendment:

  • A sub-broker license for digital platforms involves a minimum paid up capital of ₦10 million or ($24,300)
  • A Fidelity Insurance Bond covering at least 20% of the minimum capital.
  • Also four separate application fees totalling ₦500,000 or ($1200)
  • A number of SEC forms, company documents and other documentation about people involved with the company.
  • Digital sub-brokers are also required to comprehensively describe the technology that their infrastructure is built on, including details about security, backup and recovery processes.
  • The Company should have adequate KYC (Know Your Customer processes) and have documented policies for managing technology risks.
  • Also the platform must clearly explain the features, risks, responsibilities, obligations and liabilities that come with using the app to its potential customers.

Read more: Best online savings and investment platform in Nigeria.

What you should know about the SEC

The Securities and Exchange Commission is saddled with the responsibility to regulate and supervise all financial and investment activities in the country and so the commission came up with a directive, warning and prohibiting investment companies like Chaka, Trove, Bamboo and Risevest from offering foreign stock trading to Nigerians.

The SEC has now come up with a regulatory framework that works for both the investment startups and the commission. According to its latest release, the commission wants fintech companies without defined regulations to undergo an incubation program from Q3 2021.

The commission also wants to open up the Fintech space for other online stock trading platforms in Nigeria so more players could be involved.

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