Nov 20, 2015



Until recently, the trading of securities of unlisted public companies in Nigeria was freely carried out through private arrangements with little or no regulatory oversight. This arrangement seemingly did not encourage transparency, enhance liquidity of the securities and did not augur well for price certainty/discovery.

In order to ensure transparency in trading of securities of unlisted public limited companies in Nigeria, the Securities and Exchange Commission (“SEC”) introduced the Rules on Trading in Unlisted Securities (the “Rules”) effective April 13, 2015.


The Rules have been primarily introduced to ensure that the buying and selling of securities including equities and bonds of unquoted/unlisted public companies is carried out through a system which has been approved by the SEC. In this regard, the Rules stipulate that no person shall buy, sell or otherwise transfer securities of an unlisted public company except through the platform of a registered securities exchange established for the purpose of facilitating over-the-counter (“OTC”) trading of securities.

This new requirement implies that the legitimate trading platform for unlisted securities of public companies in Nigeria can only be effected through a registered OTC platform. Accordingly, buying, selling and transfer of all securities of unlisted/unquoted public companies must henceforth be made through SEC registered OTC platforms such as the NASD Plc (sponsored by the National Association of Securities Dealers) and the FMDQ OTC Plc (owned by the Financial Markets Dealers Association) platforms which deal in trading of equity and debt securities respectively. Therefore it has become illegal to trade in securities of unlisted public companies through a platform not recognised by SEC.

To further ensure strict compliance with the Rules, an ad valorem penalty provision was included in the Rules which stipulate that any unlisted public company, director, company secretary, registrar, broker or dealer or such other persons who facilitate the buying, selling or transfers of the securities of an unlisted public company otherwise than through the platform of a duly registered securities exchange shall be liable to a penalty of not less than N100,000.00 in the first instance and not more than N5,000.00 for every day of default.

It is our view that the introduction of these penalties for trading in unlisted securities will serve as deterrence and ensure strict compliance with the requirements of the Rules.

It is our belief that the introduction of the Rules will generally enhance trading in the securities of unlisted companies by ensuring transparency and liquidity which are required to further improve and make the Nigerian capital market more attractive for investment by both domestic and foreign investors.

By: Oyinkansola Annie
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