By Enam Obiosio

As Nigeria deepens efforts to make its capital market more inclusive and innovation-driven, one issue continues to demand urgent attention: the proliferation of unregistered crowdfunding platforms.

Three years ago, the Securities and Exchange Commission (SEC) issued a clear and decisive warning to the investing public: desist from engaging with any crowdfunding platform not registered with the Commission. That warning remains not just relevant – but more critical than ever.

At its core, crowdfunding is one of the most progressive tools for financing innovation, entrepreneurship, and small business growth. It allows Micro, Small, and Medium Enterprises (MSMEs) to raise capital directly from the public through online platforms. When properly regulated, it democratizes investment participation and bridges the gap between ambition and access to funds.

However, without compliance, crowdfunding becomes a trap. The SEC’s 2021 circular explicitly recognized both the promise and the peril of this model – urging all platforms to register and comply with its rules by June 30, 2021. The Commission made it clear that any operator outside this regulatory perimeter is acting illegally, exposing both themselves and investors to unnecessary risk.

From an investor relations standpoint, this warning goes beyond regulation – it speaks to the credibility of Nigeria’s investment climate. Compliance is not a bureaucratic burden; it is the language of trust between investors and issuers. A platform that is not registered with the SEC lacks the disclosure structure, transparency, and oversight necessary to guarantee investor protection.

In the evolving ecosystem of digital finance, the real asset is confidence. The moment investors lose confidence – due to fraud, opacity, or regulatory breach – the entire market suffers reputational damage. This is why we must continuously emphasize that investor relations and compliance are not separate disciplines; they are two sides of the same coin.

At StakeBridge IRPR Consulting Limited, we have long advocated that for MSMEs to attract meaningful investment, they must build their capital formation strategies around regulatory legitimacy and credible investor communication. A registered crowdfunding portal, for instance, should not only comply with SEC guidelines but also adopt standard IR practices: clear disclosure of use of funds, periodic reporting, investor engagement, and transparent governance.

In today’s environment, unregistered investment schemes often lure the public with unrealistic promises, bypassing due diligence and regulatory checks. But the long-term damage from such shortcuts is immense – both for investors who lose their funds and for genuine MSMEs who suffer diminished trust from potential backers.

The SEC’s 2021 framework – allowing incorporated MSMEs with at least two years of track record to raise funds through registered portals – was designed to protect all parties. It capped total fees at two percent of funds raised, ensuring affordability while maintaining oversight. That clarity is what separates a legitimate crowdfunding opportunity from a speculative gamble.

For Nigeria’s financial innovation to mature, we must insist that compliance be treated as value, not as a hurdle. Investors, entrepreneurs, and platform operators must see registration, disclosure, and reporting not as red tape, but as essential tools of trust-building.

As the SEC moves to establish its new SME Capital Formation Office, this earlier warning on unregistered crowdfunding remains the ethical and operational foundation for all that follows. A strong, transparent, and regulated capital formation environment will not only empower MSMEs – it will restore and sustain public confidence in Nigeria’s financial markets.

Because at the end of the day, capital follows confidence – and confidence follows compliance.

The Need for Nigerians to Desist from Unregistered Investments Crowdfunding Platforms

We welcome the SEC’s stern, recurring warning against unregistered crowdfunding platforms. Taken together with the SEC’s 2021 crowdfunding rules, that circular is more than regulatory housekeeping – it is a foundational statement about how Nigeria should modernize MSME finance while protecting investors. Below we unpack the story from an investor-relations (IR) vantage point: the structural risks, market implications, communication gaps, and an actionable roadmap for regulators, platforms, MSMEs and investors to turn crowdfunding into a credible, sustainable financing channel.

1. The core problem – credibility, not just access

Crowdfunding promises democratic access to capital. But access without credibility is dangerous. When platforms operate outside the SEC’s registration and oversight, two things happen simultaneously:

• Investor vulnerability increases – absence of disclosure standards, weak record-keeping and no formal redress channels mean higher fraud risk and capital loss for retail investors.
• Market trust erodes – each high-profile failure of an unregulated platform damages confidence in the entire alternative finance ecosystem, discouraging legitimate issuers and regulated platforms.

From an IR perspective this is simple: capital follows credibility. If Nigeria wants crowdfunding to be a durable source of MSME finance, it must first put credibility at the center of the model.

Why Investor Relations matters in crowdfunding

Traditionally IR is associated with listed companies and institutional investors. Crowdfunding collapses investor types, onboarding large numbers of retail backers with varied expectations and knowledge. This reality elevates IR functions in three ways:

1. Pre-fundraise disclosure design – clear presentation of business model, use of funds, risks, governance and exit/return mechanics. Without these, investors cannot make informed decisions.
2. Ongoing reporting and stewardship – periodic progress reports, financial updates, milestones and transparent use-of-funds reporting convert one-time backers into repeat funders.
3. Investor protection and engagement – complaints handling, transparent fee disclosure and governance mechanisms reduce information asymmetry and legal exposure.

IR is therefore not a marketing afterthought – it is the operational glue that sustains crowdfunding’s promise.

Regulatory posture: SEC’s circular and the 2021 rules – strengths and limits

Strengths

• The SEC’s rules (released 2021) and its follow-up circulars are clear on registration, eligibility (e.g., two years’ operating history for issuers), and fee caps (max 2% total fees). These provisions help set a minimum standard for market conduct and cost fairness.

Limits

• Rules do not automatically translate to market practice. Compliance requires capacity building-platforms and MSMEs must understand operational, reporting and investor-communication expectations.
• Enforcement is necessary but insufficient: prevention and education must accompany prosecution to change behaviours and lower the market’s risk profile.

From an IR standpoint, we see regulators doing the right technical work. The next phase must be about operationalising compliance through communications, training and credible signalling.

Practical IR priorities for each stakeholder

Regulators (SEC)

• Publish a public registry & verification API – easy, searchable list of registered platforms and issuers; an API for platforms to embed SEC-status checks in their sites/apps.
• Mandate minimum IR standards for all registered platforms – standardized disclosure templates, periodic reporting cadence, investor-update formats.
• Investor complaint & recovery framework – fast tracks for complaints, escrow rules for funds, and public statistics on enforcement actions to increase transparency.

Crowdfunding Platforms

• Embed IR by design – onboarding flows that force issuers to fill standardized disclosure templates (financials, governance, use of proceeds, KPI milestones).
• Post-raise reporting dashboards – investor dashboards showing fund utilisation, milestones, and performance metrics.
• Due diligence (DD) transparency – publish summary DD reports for each campaign (redacted as necessary) explaining how platform vetted the issuer.

MSMEs / Issuers

• Adopt IR discipline early – before fundraising, prepare one-page investor decks, use-of-funds schedules, and 6–12 month milestone maps.
• Design communications cadence – monthly or quarterly updates, transparent variance reporting (what changed vs plan) and an investor Q&A channel.
• Governance hygiene – clear ownership, audited or compiled accounts, and a named contact for investor relations and complaints.

Investors (Retail)

• Require verification – always check SEC registration before funding. Demand clear use-of-funds, timelines and exit mechanics.
• Understand risk profile – crowdfunding investments are higher risk and often illiquid; investors must diversify and read platform disclosure.

Communications: the multiplier effect

Investor education and public communication are not peripheral tasks – they are central policy instruments. The SEC’s public circulars must be amplified via multi-channel campaigns:

• Simple explainers: short videos and infographics on how to verify registration, read a crowdfunding offer, and report fraud.
• Media partnerships: regular columns, radio explainers (for non-urban retail investors), and social media Q&A sessions.
• Platform-led investor onboarding: in-app tutorial flows and mandatory “read and confirm” steps before funding.

When communications are proactive and clear, the market’s friction and asymmetric information fall dramatically.

Operational architecture: minimum IR checklist for a registered crowdfunding offering

For regulators to ensure quality, and for platforms/issuers to meet expectations, the following checklist should be standard:

Pre-offer (must be public before fundraising starts):

1. Issuer legal verification & 2-year operating history evidence.
2. One-page investment summary (business model, market size, management bios).
3. Use-of-funds schedule and milestones.
4. Financial snapshot (latest year, interim management accounts if available).
5. Risk factors and proposed investor returns/exit mechanics.
6. Platform’s fee disclosure (must reflect SEC cap rules).

Post-offer (regular reporting obligations):

1. Monthly progress update (narrative + KPI dashboard).
2. Quarterly financial statement (at minimum management accounts).
3. Use-of-funds reconciliation within 30 days of each milestone.
4. Investor AGM or Q&A session annually or at major milestones.
5. Complaint & refund mechanism publicly posted.

Adherence to this checklist should be a condition of registration renewal.

Measuring success – KPIs regulators and platforms should track

• Number of registered platforms and active issuers (growth momentum).
• Total funds raised through registered platforms (volumes).
• Investor complaint rate per 1,000 investors (safety indicator).
• Repeat investor rate (trust/repeatability marker).
• Time-to-first-reporting compliance (reporting discipline).
• Conversion rate from campaigns to formalisation (how many issuers formalise operations/tax compliance after fundraising).

These metrics allow data-driven policy adjustments and public accountability.

Policy recommendations (what we should do now)

• SEC should publish a live, easily searchable registry of registered crowdfunding platforms and issuers. This is the single most powerful immediate transparency measure.
• Mandate standardized disclosure templates and reporting cadences for all registered platforms within 6 months.
• Launch a nationwide investor education campaign (TV, radio, social media, community centres) explaining how crowdfunding works, risks, and how to verify registration.
• Introduce an IR capacity-building programme for MSMEs (through SMEDAN, NBTE, state enterprise centres) focusing on disclosure, reporting and investor communications.
• Establish a fast-track enforcement unit to prosecute unregistered operators and publish enforcement outcomes to deter illicit activity.

Final thoughts – the IR frame for sustainable crowdfunding

Crowdfunding is not only a financial innovation; it is a communications problem at scale. Its durability depends on how well we manage information flows, protect small investors, and instill governance in new issuers. From our vantage as IR practitioners, the SEC’s warning against unregistered platforms is necessary and right. But warnings must be backed by accessible verification tools, standardized IR practices, and sustained investor education.

If we align regulation with communication and capacity building, crowdfunding can transform from a risky novelty into a robust pipeline for enterprise growth and formalisation. Our collective task is to ensure that every naira raised through crowdfunding is backed by transparency, accountability and a clearly communicated path to value.

We call on SEC, SMEDAN, MSME agencies, crowdfunding platforms and industry stakeholders to treat investor relations and compliance as core infrastructure – not optional extras. StakeBridge IRPR Consulting stands ready to partner on a rapid IR capacity-building rollout, disclosure template design, and public investor-education campaign to make crowdfunding a safe, attractive, and scalable source of capital for Nigeria’s MSMEs.