New SEC Directive Rocks Nigeria’s Capital Market: What Directors and Firms Must Know

The Securities and Exchange Commission (SEC) of Nigeria has just dropped a regulatory bombshell that’s sending ripples across the nation’s financial ecosystem. On Friday, the SEC issued a circular introducing strict tenure limits for directors of capital market operators (CMOs) classified as “significant public interest entities.”

This unprecedented move has triggered anxiety and urgent conversations in boardrooms across the country. But what exactly does this mean for businesses and executives?

Let’s unpack the details.

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📜 What Did the SEC Announce?

The new directive, issued on June 21, 2025, sets maximum time limits that directors can serve in their roles—both within the same company and across affiliated group structures.

✴️ Key Provisions:

• 10-year limit in the same company: No director may serve more than 10 consecutive years at a single capital market operator.

• 12-year limit across a group: The total allowable tenure is 12 consecutive years if the director works across companies within the same group structure.

• Chairman tenure capped: A person may serve as Chairman for a maximum of 4 years.

• CEO-to-Chairman transition restricted: If a CEO or Executive Director wants to become Chairman, they must step down for 3 years before taking the new role.

• No transition for INEDs: Independent Non-Executive Directors (INEDs) can no longer switch into executive roles (like CEO or ED) within the same company or group.

🕒 Effective Immediately: The new rules apply right away, and previous years of service already count toward the limits.

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🏛️ Who’s Affected by This Directive?

The rules target directors of Capital Market Operators (CMOs) identified as “significant public interest entities.”

Likely Affected Firms:

• Investment banks

• Stockbroking firms

• Fund/asset managers

• Issuing houses

• Capital trustees

• Clearing and settlement firms

Essentially, if a firm plays a critical role in Nigeria’s financial system or handles public funds, it's likely to fall under this category.

🔍 Still Waiting on Clarity: The SEC hasn’t yet released a formal list of which CMOs qualify. Many firms are left guessing whether they’re in scope, leading to widespread uncertainty.

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⏱️ Timeline for Implementation

Date	Event
June 21, 2025	SEC issues circular with new director tenure limits
Immediately	Tenure restrictions take effect
Ongoing	CMOs must review director records and plan transitions
TBD	SEC expected to clarify “significant public interest” list

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📌 Why Is the SEC Doing This?

This directive is part of a broader push to improve corporate governance across Nigeria’s capital markets.

🎯 Goals Behind the Reform:

• Prevent board entrenchment: Long-serving directors often become too influential, reducing checks and balances.

• Improve independence: Ensures INEDs remain truly independent and not future executive hopefuls.

• Strengthen public trust: These reforms signal seriousness in regulating market behavior and leadership ethics.

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🚦 What Should CMOs Do Right Now?

If your company could fall into the “significant public interest” category, don’t wait for the SEC to call your name.

✅ Immediate Action Steps:

1. Conduct a board tenure audit: Track how long each director has served, both within the company and across the group.

2. Review succession plans: Identify who must step down soon and prepare replacements.

3. Communicate clearly: Notify directors and stakeholders about necessary transitions.

4. Update corporate governance policies to align with the new SEC standards.

5. Avoid INED violations: Don’t promote independent directors into executive roles anymore.

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💬 What Are Industry Experts Saying?

The financial community has responded with mixed emotions:

“There’s a lot of confusion. We need a clear list of affected companies,” said one investment banker.

“Even if you’re a private firm, if you handle public funds at scale, you may be affected,” another fund manager noted.

While many agree the move is a step in the right direction for governance, the lack of clarity about enforcement and coverage is raising serious concerns.

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🔮 What Comes Next?

The SEC is expected to publish additional guidelines, including:

• A formal list of “significant public interest entities”

• Definitions of group structures

• Enforcement timelines and potential sanctions for non-compliance

Until then, companies are advised to err on the side of caution and prepare as though they are included.

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🧠 FAQs About the SEC Tenure Directive

1. Does this rule apply to private companies?

Yes—if the company is a capital market operator and handles public interest funds.

2. Is the rule retroactive?

Yes. The SEC is counting all prior years of service toward the new limits.

3. Can an Independent Director become a CEO?

No. INEDs can no longer transition into executive roles within the same company or group.

4. What if a director is over the limit already?

They must step down immediately unless otherwise exempted.

5. What defines a group structure?

The SEC hasn’t clarified this yet, but it typically includes subsidiaries, holding companies, and affiliates.

6. What’s the penalty for non-compliance?

While specific sanctions haven't been released, firms risk regulatory action, license issues, or reputational damage.

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🏁 Final Thoughts: Don’t Get Caught Off-Guard

This directive marks a major milestone in Nigeria’s journey toward a more transparent and accountable capital market. But the onus is now on firms to adapt quickly, stay informed, and implement strong succession governance.

🛠️ If your firm hasn’t started reviewing board tenure and succession plans, now’s the time.