CMA issues guidance for transitional arrangements in the coffee sector
Nairobi, 06 July 2020… In order to facilitate transitional arrangements in the coffee sector, the Capital Markets Authority (CMA) has issued guidance to support sector players. This follows the gazettement of the Capital Markets (Coffee Exchange), Regulations 2020, which brought the Coffee Exchange and its members under the regulatory oversight of CMA. The regulations were gazetted by the Cabinet Secretary for the National Treasury and Planning on 3 April 2020.
Following amendment of the Capital Markets Act through Finance Act 2016, the Spot Commodities Market was brought under regulatory oversight of CMA. CMA is therefore mandated to license the Coffee Exchange and the Coffee Brokers. The Capital Markets (Coffee Exchange) Regulations, 2020 read together with the Crops (Coffee) General Regulations,2019 envisage that the Coffee Exchange and the Coffee Brokers will be licensed and supervised by CMA effective 01 July 2020.
The CMA Acting Chief Executive, Mr. Wyckliffe Shamiah observed; ‘’the following measures have been put in place; the Nairobi Coffee Exchange is granted permission to operate as it works towards full compliance with the Regulations; all the applicants intending to offer coffee brokerage services are allowed to continue performing the role once they apply and as they work towards full compliance; noting that the Direct Settlement System (DSS) is not in place as envisaged, CMA directs that the existing payment mechanisms be utilized in the interim period as the DSS is being put in place; details of direct coffee sales will be reported to the Nairobi Coffee Exchange; all disputes that may arise in relation to coffee sales should be forwarded to the Authority to ensure follow up and resolution for the benefit of the coffee growers; and an industry committee be constituted to address any gaps that exist and those that may emerge during the transition period’’.
The Capital Markets (Coffee Exchange) Regulations 2020 provide for; incorporation of the coffee exchange; licensing of brokers; establishment and operationalization of a direct settlement system for expedited and transparent payment of coffee sales proceeds; conducting of trading in a secure, stable and transparent manner in an environment of fair competition; and protection of the interests of the grower, the buyer and other stakeholders at an exchange. The Coffee Exchange Regulations were harmonized with the Capital Markets (Commodity Markets) Regulations, 2020.
BACKROUND 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. 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.
The Capital Markets Act was amended through the Finance Act 2016 to expand the mandate of the Authority to include regulatory oversight of the Spot Commodities Market. Section 19 and 23 (1) of the Capital Markets Act (CAP 485A) prohibit any person to carry on the business of a commodities exchange, commodity broker or authorized clearing and settlement provider unless they hold a valid license or approval issued by CMA.