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16 May 2024

CMA approves registration of Arvocap Asset Managers Unit Trust Scheme

Nairobi, 15 May 2024…The Capital Markets Authority (CMA) has approved the registration of Arvocap Unit Trust Scheme pursuant to the Capital Markets Act and the Capital Markets (Collective Investment Schemes) Regulations, 2001.

The collective investment scheme comprises 10 sub-funds including Money Market Fund, Ngao Fixed Income Distribution Fund, Almasi Fixed Income Accumulation Fund, Eurofix Fixed Income Special Fund (USD), Thamani Equity Fund, Africa Equity Special Fund, Global Equity Special Fund, Multi-Asset Strategy Special Fund (USD), Global Sharia Equity Special Fund (USD) and Mabruk Sharia Special Fund (KES)

‘Collective investment schemes are significant vehicles through which retail investors can easily participate in the capital markets, noting their ability to facilitate growth of customer base and democratization of wealth’, noted CMA CEO Wyckliffe Shamiah. CMA projects that the value of assets under management will grow by nine percent in 2025 up from the three percent growth recorded in 2022, given the value proposition of the investment vehicles. Mr. Shamiah said that the Authority had licensed 22 new fund managers since 2020, demonstrating interest from the market.

The Authority also approved registration of additional sub-funds within existing unit trust schemes including Old Mutual Special Fixed Income Fund, NCBA Global Equity Special Fund and Global Fixed Income Special Fund, KCB Wealth Fund (Special Fund), Jubilee Money Market Fund (USD) and Jubilee Enhanced Fixed-Income Special Fund.

The approvals will remain in place perpetually unless revoked at the request of either the firm or by the Authority. The approval brings the number of registered collective investment schemes (CIS) to 37.

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BACKGROUND INFORMATION

The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair, and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. CMA also regulates the commodity markets and online forex trading. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact: Antony Mwangi, Manager Corporate Affairs & International Relations on amwangi@cma.or.ke

7 May 2024

CMA enhances competition, grants five new licenses

lydia Press Release

Nairobi, 7 May, 2024…Capital Markets Authority has given the greenlight to five new firms to operate in the industry in different capacities in the latest move to deepen and develop the capital markets.

In line with the Capital Markets (Licensing Requirements) (General) Regulations 2002, Tim Walsh Advisory Services has been licensed as an Investment Adviser whereas IC Markets Kenya Limited has been licensed to operate as a non-dealing online foreign exchange broker. GTXN Investments Limited is approved to carry on the business of a fund manager.

‘The increasing demand for licenses in the intermediary sector in recent years is a positive emergence as it enhances competition, innovation and the reach of capital markets products and services to retail investors’, CMA CEO Wyckliffe Shamiah said. He noted that this was significant as the regulator’s focus is to balance the diversity of investors by encouraging greater participation in the capital markets from retail investors. All employees with direct dealings with clients will be required to undertake the Securities Industry Certification Programme (SICP) within one year from the date of licensure.

CMA noted that Kirinyaga Slopes Coffee Brokerage Company Limited which had previously been conditionally licensed to operate as a coffee broker at the Nairobi Coffee Exchange, has now been granted full license status, having satisfied all the requirements of the Capital Markets Act and Capital Markets (Coffee Exchange) Regulations, 2020.

Coffee Estates Bourgeoisie Brokers Limited, has been granted a conditional license valid for six months to operate as a coffee broker subject to full compliance with the Capital Markets Act and Coffee Exchange Regulations.

The licenses will remain in force unless otherwise suspended or revoked following the necessary due process.

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BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY

6 May 2024

East African Securities Regulators agree on to develop regional frameworks for sustainability linked financing and carbon credit markets.

lydia Press Release

Nairobi, 06 May 2024, The regional capital markets regulators, under the umbrella of East African Securities Regulatory Authorities (EASRA) have resolved to develop a regulatory framework for sustainable finance with a view to developing a harmonised regional framework.

The framework will provide standards for regulating sustainability linked issuance of securities, use of proceeds, projects evaluation, and reporting. As testament of the iron-clad commitment of the regulators towards contributing to the net-zero agenda, regional regulators will also conduct a regional study on carbon credit market with the view to gaining an understanding of the existing stakeholders and the regulatory framework, which would then inform an East African regional carbon credit framework for domestication at national level.

Speaking at the meeting, the Chairperson of EASRA, Ms. Josephine Okui Ossiya, who is also the Chief Executive Officer of the Capital Markets Authority Uganda said that EASRA was keen on developing a new strategic plan for the next five years (2024 – 2029). To ensure that the plan meets the long-term funding needs of the region, it will be anchored on the East African Community Vision 2050, the African Union Agenda 2063 and the United Nations Sustainable development goals. She added that, “For relevance and the necessary buy-in, the strategic plan development process will see a wide variety of stakeholders being consulted, on what they would wish to see regional capital markets regulators do to facilitate capital raising while ensuring investor protection. We shall be reaching out to market intermediaries across the East African region to get their views on challenges they face and proposals on regulatory interventions that could eliminate the hurdles and ease market development.”

At the same meeting, the regulators also deliberated on key emerging issues in the region including oversight of commodities exchange markets, supervision of over-the-counter markets, segregation of client assets, making private capital financing work for Small and Medium Enterprises, operation of regulatory sandboxes and growth of collective investment schemes. They noted the need to ensure the EAC market is homogeneous.

The committee further underscored the risks presented by macro-economic stability and urged members to develop local investor bases to mitigate the risk of reversal of inflows from off-shore investors. It was noted that EASRA remains a powerful platform to learn from each other and also identify early warning signs that may have a ripple effect on the region. To this end, the members committed to ensure continued information sharing.

The Chairperson welcomed the full establishment of CMA-Burundi. She further tasked the technical committees to expedite the process of bringing on-board the Democratic Republic of Congo, Republic of South Sudan and Somalia in fulfilment of the regional agenda of creating an integrated capital market.

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12 March 2024

CMA seeks stakeholder feedback on amendments to the regulatory framework

lydia Press Release

Nairobi, 12 March 2024 …In line with its new strategic direction, the Capital Markets Authority (CMA) has developed Margin Trading Regulations, reviewed the Guidelines on Financial Resource Requirements for Market Intermediaries, and amended the Commodity Markets Regulations.

The CMA Chief Executive Officer, Mr. Wyckliffe Shamiah, observed; ‘’The regulatory review is aimed at enhancing responsiveness to changing dynamics, market developments, technological advancements, and emerging stakeholder expectations’’.

Mr. Shamiah explained that the introduction of Margin Trading is expected to enhance market liquidity by increasing the supply and demand for securities and maintain the stability and integrity of financial markets in line with its mandate.

Margin financing enables investors buy large quantities of securities seen as undervalued or their price has been impacted by negative news or investor sentiments but have potential for recovery. When investors are active on both the demand and supply side, investor sentiments improve, thereby attracting more investors to the stock market.

Margin Trading is a form of securities trading that involves buying securities by borrowing funds (margin loan) from a broker at an interest rate (margin rate). In margin trading, the securities trader only pays a fraction of the actual cost of the trade up-front and pledges the securities bought on margin as collateral for the remaining fraction of the cost. Margin Trading will be undertaken by Trading Participants approved by CMA.

Margin Trading was recommended as one of the measures to improve liquidity in the equity market in the 2015 World Bank Report on Potential Measures for the Improvement of Liquidity in the Kenyan Equity Markets. Other recommendations included Securities Lending and Borrowing (SLB) and Market Making. The Capital Markets (Securities Lending and Borrowing and Short Selling) Regulations were gazetted in 2017 which permit SLB and short selling.

The Authority also approved the rollout of day trading in 2021 to support the enhancement of market liquidity.

Margin Trading has been implemented in other jurisdictions such as the USA, China, Nigeria, Japan, Thailand, and India.

The Financial Resource Requirements for Market Intermediaries have been amended to include new license categories not addressed in the current guidelines. The new license categories include Intermediary Service Platform Providers, Broker-Dealers, Trustees, Custodians and Money Managers.

The Capital Markets (Commodity Markets) Regulations 2020, have been amended to introduce fees to support regulatory oversight over licensed entities in the commodities sector.

The Authority invites stakeholders to submit comments on the draft Guidelines and Regulations by 11 April 2024.

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BACKGROUND INFORMATION

5 February 2024

CMA licenses VCG Asset Management Limited asa Fund Manager

lydia Press Release

Nairobi, 05 February 2024… The Capital Markets Authority (CMA) has granted VCG Asset Management Limited a fund manager’s license. The license, granted under the provisions of the Capital Markets Act Cap 485 A, of the laws of Kenya and its associated regulations, signifies a significant milestone for VCG Asset Management Limited in the financial industry. The grant of the license brings to 41 the number of fund managers licensed by CMA.

A fund manager is a manager of a collective investment scheme (such as a unit trust), registered venture capital company or an investment adviser who manages a portfolio of securities more than an amount prescribed by the Authority from time to time.

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BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY

5 February 2024

CMA licenses Real Estate Investment Trust (REIT) Trustee

lydia Press Release

Nairobi, 05 February 2024…The Capital Markets Authority (CMA) has granted a license to NCBA Bank Kenya PLC to operate as a Real Estate Investment Trust (REIT) Trustee. The issuance of license is in line with the Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations, 2013; the Capital Markets (Corporate Governance) (Market Intermediaries) Regulations, 2011; and any other applicable Regulations.

The CMA Chief Executive Officer, Mr. Wyckliffe Shamiah, said; ‘’the Authority remains committed to support the National Government’s Affordable Housing agenda through facilitating uptake of REITs, an innovative capital markets product. NCBA Bank Kenya PLC is expected to support investments in the real estate sector, contributing to the growth of the economy and the Affordable Housing Initiative’’.

Mr. Shamiah emphasized the importance of REITs as a capital market’s product that not only provides an investment opportunity for Kenyans but also serves as a catalyst for the development of affordable housing projects.

CMA remains dedicated to providing a robust regulatory environment that encourages innovation and sustainable economic development.

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BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY

2 February 2024

APPROVAL OF EABX PUBLIC COMPANY LIMITED AS AN OVER-THECOUNTER SECURITIES EXCHANGE AND RECOGNITION AS A SELF REGULATORY ORGANIZATION

lydia Press Release

The Capital Markets Authority has granted approval to EABX Public Company Limited to operate as an Over The Counter Securities Exchange and recognized it as a Self-Regulatory Organization (SRO).

The approval is granted after compliance with Section 20 of the Capital Markets

Act as read with Regulation 3 to 13 of the Capital Markets (Licensing Requirements) (General Regulations), 2002 and Section 18B of the Capital Markets Act, respectively.

An OTC is a market where traders interact to negotiate their transactions as opposed to what happens in a formal securities exchange. It involves bilateral negotiations and trading through dealer networks. Modern OTC markets do not have physical location but all trades occur electronically and directly between two parties in a decentralized market.

An SRO is an entity that is organized for the purpose of regulating the operations and the standards of practice and business conduct of its members and their representatives with a view to promoting the protection of investors and the public interest.

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BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY

The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital

Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and

developing an orderly, fair, and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence.

CMA also regulates the commodity markets and online forex trading. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact: Antony Mwangi, Manager Corporate Affairs & International Relations on amwangi@cma.or.ke

1 February 2024

Public Announcement

lydia Press Release

The Capital Markets Authority wishes to inform the public that the License Application process has been automated. We encourage all license applicants to submit their applications through the online platform at https://cma.ecitizen.go.ke within the e-Citizen platform. Please locate the relevant license in the list and initiate your application process by clicking on the respective link.
The payment of license application fees can be conveniently completed through M-PESA Paybill 222222. Should you encounter any challenges during the application process, we invite you to reach out to the Capital Markets Authority for assistance. You can contact us via email at ceoffice@cma.or.ke or by phone at +254 20 2264000.
We appreciate your cooperation in adopting this streamlined and efficient online application process.

4 January 2024

CMA admits Frictionless Enterprises Limited to the Regulatory Sandbox

lydia Press Release

Nairobi, 4 January, 2024… In line with its commitment to deepen and develop the capital markets industry by facilitating the deployment of financial technology (fintech), the Capital Markets Authority (CMA) has announced the admission of Frictionless Enterprises Limited to its regulatory sandbox.

Frictionless Enterprises Limited intends to test Power IO App, a mobile application that enables workers to invest and employers to effectively manage their workforce via the deduction management system provided in the App. As Power® connects to and contracts with employers and gig platforms, users are able to schedule investments from their earnings. This means that an individual could allocate a percentage of their earnings every month to be deposited into a money market fund.

Employers and gig platforms deduct contributions from the Workers’ wages and the Power® solution automatically sweeps the funds into the underlying money market fund. Workers are able to schedule these contributions to occur each time they are paid, or at their preferred contribution cycle. This functionality helps to maximize contributions and eliminate the likelihood of people spending their wages if they first received it into a current account or wallet.

Frictionless Enterprises Limited will test this application together with Sanlam East Africa Investment Limited as the Fund Manager.

The firm will test the innovation in compliance with the provisions of the Capital Markets Regulatory Sandbox Policy Guidance Notes (PGN).

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BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY

28 December 2023

CMA’s Corporate Governance Report shows improvement for listed Companies

lydia Press Release

Nairobi, 28 December 2023…The Capital Markets Authority (CMA) has released the 6th edition of its annual State of Corporate Governance Report. The Report highlights the performance of listed companies in adhering to corporate governance principles within the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015.

The comprehensive assessment features governance self-assessments by listed companies who then report back, based on templates provided by CMA. The annual weighted overall score by all listed companies increased to 75.71 percent (leadership rating) in the financial year 2022/2023, up from 72.27 percent (Good rating) the previous year. ‘The performance of listed companies on aspects of corporate governance serves as a vital guide for issuers, highlighting areas of excellence and pinpointing avenues for refinement, with an overarching aim to fortify corporate governance and sustainability practices, ensuring sustained growth, transparency and stakeholder confidence in the capital markets sector’, said CMA Chief Executive Officer Wyckliffe Shamiah.

The analysis revealed that 31 issuers were rated in the leadership category on governance issues in 2022/2023 financial year, up from three companies in 2017/2018 when the Report was first published. To be rated in the leadership category, a listed entity must score 75 percent and above in the assessment. Eight companies attained a rating of ‘good’, having obtained between 65 and 74 percent. Six companies achieved a fair rating (between 50 and 64 percent), and four companies were categorized as needing improvement.

The Authority evaluated the listed companies based on the seven principles of the CG Code namely Introduction to the Code, Board Operations and Control, Rights of Shareholders, Stakeholder Relations, Ethical and Social Responsibility, Accountability, Risk Management, and Internal Control, and Transparency and Disclosure.

The principle on Accountability, Risk Management and Internal Control emerged as the highest-scoring principle achieving a remarkable score of 80.77% (Leadership rating). Sector-wise analysis revealed outstanding performance in the Banking, Manufacturing & Allied/Automobiles & Accessories, Insurance and Energy and Petroleum sectors, all achieving a leadership rating. Conversely, other sectors secured a good rating, except for the Agricultural and construction and allied sectors, which recorded a fair rating. The most substantial advancement was observed in the Investment and Investment services sector, escalating from 64% to 78.74%, marking an impressive increase of 14.74%.

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BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY