AN OVERVIEW OF INSIDER TRADING IN NIGERIA: A LEGAL PERSPECTIVE

Abstract

When someone trades in a ‘security’ ‘on the basis of’ significant nonpublic knowledge that they have gained by breaching a duty of trust or confidence, it is considered insider trading. One of the things that works against strong corporate governance is insider trading, which is also one of the most violent crimes committed against the principles of fair dealing in the capital market. Trading in a company's shares by an insider is not illegal in and of itself. Rather, it is forbidden when an insider violates a duty of trust or confidence by trading in the company's stock on the basis of confidential information that excludes others, including tipping. This article aims to investigate the legal and regulatory environment, the issue of insider trading in Nigeria, and the history of insider trading in Nigeria using the doctrinal method. This study also reveals that, in contrast to the CAMA 1990, which contained sections 614 to 624 expressly designed to address insider dealing until they were repealed and subsequently incorporated into the Investment and Securities Act (ISA) 2007, the Companies and Allied Matters Act (CAMA) 2020 contains no provisions at all pertaining to insider trading. The only law that was created expressly to prohibit insider trading is the ISA. This paper concludes by recommending that as outlined above in this work, the provisions of the ISA are not detailed enough to tackle the crime of insider dealing in Nigeria. CAMA 2020 should be amended to make room for the provisions of insider trading. The ISA too needs amendment to bring it on par with jurisdictions such as the US and the UK. This paper further recommends that mechanisms should be put in place to monitor primary and secondary insiders to ensure that inside information is not abused by the insiders who have access to the information to promote good corporate governance.