Understanding SEC's Role in Investor Protection and Ponzi Schemes
Explore the pivotal role of SEC in safeguarding investors, distinguishing Ponzi schemes from legitimate investments, and preventing financial fraud. Learn how SEC empowers investors and upholds market integrity to ensure a secure investment environment in Nigeria.
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THE ROLE OF SEC IN INVESTOR PROTECTION HAFSAT OLUBUKANLA RUFAI (MRS.) DEPUTY DIRECTOR AND HEAD OF OPERATIONS, LAGOS ZONAL OFFICE SECURITIES AND EXCHANGE COMMISSION, NIGERIA
Learning Objectives About SEC Investor Protection How SEC Protects Investors What are Ponzi schemes? Differences between Ponzi schemes and legitimate investment schemes Avoid falling prey to Ponzi schemes Conclusion Questions OUTLINE
At the end of this presentation, participants will be: aware of Securities and Exchange Commission (SEC) and how it protects investors able to differentiate between Ponzi and legitimate investment schemes LEARNING OBJECTIVES
Derives its powers from the Investment and Securities Act (ISA) 2007 Primary objective of investor Protection Apex regulatory body of the Nigerian Capital Market ABOUT SEC Regulates and develops the Nigerian Capital Market Regulates investment and securities business in Nigeria
The rationale for investor protection lies in the fact that the instruments traded in the capital market are intangible and do not lend themselves to physical examination by buyers. Investment is driven by anticipation of returns from realized earnings and capital growth. Each asset possesses its own unique risk and return characteristics. INVESTOR PROTECTION
Rule making Empowerment of SROs and Trade Groups Investor Protection Fund Effective surveillance On-site and off-site supervision Investigation Enforcement and compliance Complaints Management Framework Active website Reforms HOW SEC PROTECTS INVESTORS
Ponzi schemes are fraudulent investment schemes that pay existing investors with funds collected from new investors. They typically appeal to greedy, unsuspecting or naive investors who are promised unrealistically high returns with little or no risk disclosed. Ponzi schemes usually need a constant inflow of deposits to keep operating. When large numbers of existing investors begin to cash out and/or it becomes difficult to recruit new investors, the schemes tend to collapse. WHAT ARE PONZI SCHEMES?
Legitimate Schemes Ponzi Schemes Licensed Operators Unlicensed Operators Registered Investments Unregistered Investments DIFFERENCES BETWEEN PONZI SCHEMES AND LEGITIMATE INVESTMENT SCHEMES Appropriate balance of risk and return Asset-driven returns High returns with little or no risk disclosed Overly consistent returns Documented and explained investment strategies Timely account statements Delayed or erroneous account statements No marketing expectation Requirement to recruit new investors Secret/Ambiguous/Complex investment strategies
While the SEC in collaboration with other regulators in the financial sector strive to clamp down on ponzi schemes, investors also have a huge role to play in helping to curb the activities of these fraudsters. Investors are advised to: confirm if the investment product, scheme or company is registered by the SEC before investing via www.sec.gov.ng or sec@sec.gov.ng review the financial records of the company beware of promises of high, unrealistic and consistent returns diversify investments not rely on reputation or word of mouth alone. Rather, verify the company s profile and claims over the internet and from regulatory authorities understand how genuine investments work consult their investment adviser, stock broker, fund manager, accountant or solicitor for advice AVOID FALLING PREY TO PONZI SCHEMES
Investments enable growth in wealth. So, by all means, you are encouraged to invest. Don t be careless; before you invest, visit www.sec.gov.ng/cmos investment agent is registered by SEC. Investors should be alert and note that if an investment seems too good to be true, it probably is. to verify that your CONCLUSION
