In the Nigerian capital market, adherence to securities laws and regulations is essential for preserving investor trust, market integrity, and the smooth operation of the financial system. Within the Nigerian capital markets, insider trading bans and disclosure regulations are two essential components of compliance.

Insider Trading Prohibitions:

Section 315 of the Investment and Securities Act defines an insider as any person who is connected with the company in one or more of the following ways;

  • A director of the company;
  • An employee of the company
  • Involved in a professional or business relationship of the company
  • A shareholder of the company who owns 50% or more of any class of securities
  • Or any person who is or can be deemed to have any relationship with the company or member
  • Member of an audit committee of a company

Insider trading occurs when an individual purchases or sells securities or stocks based on confidential information that could influence the value of those assets.
The main law governing insider trading in Nigeria is the Investment and Securities Act (ISA). The Act expressly forbids trading;

  • when in possession of confidential information about a price that has not been published
  • as well as consulting with or obtaining deals sealings in securities
  • disclosing price-sensitive information.

The Securities and Exchange Commission’s (SEC) Rule 10b-5 further bans business officials, directors, and other employees from profiting from or avoiding a loss on company stocks by exploiting sensitive corporate information. Additionally, it forbids providing third parties with confidential information.

It is important to remember that insider trading should be prohibited since it provides some people unfair advantages, allows for manipulation, and hinders the growth of the capital market by deterring potential investors from participating.

The SEC employs a variety of procedures to ensure adherence to the ISA Act and SEC regulations. For example, the SEC carries out from time to time market surveillance ensuring that organizations are acting under the regulatory provision against insider trading.  Also, insider trading in Nigeria is punishable under the ISA Act. Offenders risk fines of up to five million dollars and/or 5 years imprisonment.

Disclosure Requirements:

The Securities and Exchange Commission (SEC) provides that issuance of securities must make frank and full disclosure of material fact concerning the securities sought to be offered to the public in what is called a “prospectus”.  The purpose of the prospectus is to ensure that all potential subscribers and purchase of securities are fully informed of all facts material to their decision to subscribe or purchase the securities of the company. To ensure compliance with these disclosure requirements, the ISA provides for liabilities to be incurred for any misrepresentation or untrue statements made in the prospectus.

Further disclosure requirements include the SEC requirements for the filing of quarterly and annual returns by capital market operators, weekly foreign exchange transaction reports on AML/CFT, and quarterly and annual AML/CFT returns.

The Nigeria Stock Exchange (NSE) also provides that listed companies must publish annual reports, audited financial statements, and interim financial reports to ensure transparency and provide investors with relevant information.


In conclusion, the integrity and effectiveness of Nigeria’s capital markets depend on adherence to disclosure laws and insider trading bans. To maintain investor trust and safeguard market integrity, regulators, market players, and listed businesses all have important roles to play in making sure that these laws and regulations are followed.

Written bOlawunmi Ojo for The Trusted Advisors

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