A Closer Look at the Securities and Exchange Commission’s (SEC) Accelerated Regulatory Incubation Program Structure

Introduction 

The Securities and Exchange Commission (SEC) announced the Accelerated Regulatory Incubation Programme (ARIP) Framework on June 21, 2024, aiming to improve compliance with regulations and expedite the onboarding process for Virtual Assets Service Providers (VASPs) and Digital Investments Service Providers. The framework requires completion by 30 days.

Applicability and Eligibility

The ARIP Framework applies to Digital Investment Services Providers (DISPs) and Virtual Asset Service Providers (VASPs) offering digital asset services in Nigeria. Eligibility criteria include

• Incorporated and has an office in Nigeria, and its Chief Executive Officer/Managing Director or someone functioning in a similar capacity is resident in Nigeria
• Performing investment or securities business
• Seeking registration or having a pending virtual asset-related application with the SEC.

What are the ARIP’s application requirements and steps?

The Framework divides the ARIP application procedure into two categories, which includes

a.Initial Assessment Phase: An applicant must fill out and submit an initial assessment form via the SEC Portal to move on to the next level. Those who are successful in this step will receive an approval-in-principle (AIP) from the SEC.

b.Application Phase: The applicant must submit company documents, registration with NFIU, N2,000,000 fee, shareholder funds, fidelity bond, operational plan, and a fidelity bond covering 25% of required funds.

Limitations for Eligible Candidates

The ARIP Framework restricts qualified applicants from conducting other securities or investment businesses other than those for which they have applied to the Commission., conducting promotional activities, or growing their customer base more than 10% from the point of entry.

Termination of Participation by the SEC

The SEC can terminate an entity’s participation in the ARIP if it’s found unfit, breaches conditions, or fails to comply with the Framework. Participants must maintain a detailed operational plan, including a comprehensive business model, risk management frameworks, and investor protection measures.

Transition to Registration

After the ARIP period, participants must be registered by the SEC, who may grant approval, adopt new regulations, or deny permission. The SEC may also organize training and examinations for sponsored individuals. The ARIP framework is not meant to bypass existing rules and regulations.

Conclusion

The ARIP is a positive move that will help Nigeria’s regulations over digital assets and services evolve.

The SEC demonstrates to investors and other stakeholders that it supports innovation while preserving market integrity and investor safety through the Framework, which offers a structured route for VASPs and DISPs to obtain preliminary approval and comply with regulatory requirements.