On 21 January 2021, the Securities and Exchange Commission (“SEC”) published its approved Rules on Crowdfunding (the “Crowdfunding Rules” or the “Rules”), following the release of its draft exposure rules on crowdfunding on 28 March 2020.
Crowdfunding refers to the means by which persons or entities, in want of funds for specific objectives, raise a largely targeted sum from smaller amounts made by contributors provided through platforms on the internet.
The Rules are applicable to investment-related crowdfunding ventures and seek to regulate activities of key market participants within the crowdfunding space, (which include intermediaries, fundraisers, and investors), by specifying rights, duties, and responsibilities that govern their respective conducts.
Eligibility Requirements of Fundraisers
Pursuant to the Crowdfunding Rules, a fundraiser is an entity seeking to raise capital through the issuance of investment instruments (either equity or debt securities) to members of the public through a crowdfunding portal. By the provisions of the Rules, eligible fundraisers include: (i) Nigerian medium, small and micro enterprises (“MSMEs”) companies with an operating track record of at least 2 (two) years; and (ii) Nigerian MSMEs companies with less than 2 (two) years’ operating track record, having a strong technical partner that possesses a minimum operating track record of 2 (two) years or has a core investor.
