Kenya’s CMA brings new rules for brokers and investment banks

Kenya’s Capital Markets Authority is putting new regulations into law by the end of August, including tighter controls on stockbrokers and investment banks.

According to reports, the new rules set minimum share capital for stockbrokers at KSh. 50 million ($650,000) from the current KSh 5 mln, and investment banks at KShs 250 million ($3.25 million). They also require brokers to use International Financial Reporting Standards. Brokers and banks will publish annual audited accounts and half yearly unaudited accounts in at least two daily newspapers with a nationwide circulation, and they require professional indemnity insurance.

The deadline for accounts is three months after the end of June and December.

Kenya has asked consultants to bid to offer advisory services to the CMA as it tightens the regulatory regime. The authority is changing its regulatory framework through licensing, emphasizing compliance during applications for licences at the beginning of the each year. The regulator will manage risks through classifying stockbrokers and investment banks according to the strength of their financial position, the expertise of the management and their market exposure in products and client base. It will use this to focus its efforts on firms that are ranked risky.

Stockbrokers and investment banks are likely to restructure their boardrooms and upgrade their management, says The Nation newspaper. Individuals who own more than 25% of a brokerage or investment company will not be allowed to hold any management position.

The stock market is currently recovering from a collapse which was partly linked to a fall in investor confidence after losing money to collapsing stockbrokers, including three who have closed due to poor management and fraud. The CMA aims to restore confidence.

The regulator aims also to create more transparency in collective investments such as unit trusts and pension funds and is increasing its drive for public awareness.

4 Responses to “Kenya’s CMA brings new rules for brokers and investment banks”


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  3. Edmund Kamugisha

    “Individuals who own more than 25%” will surely change the set up significantly!

  4. Tom Minney

    It is great that regulators are getting more proactive and improving the quality of markets. Africa needs capital and increasingly domestic savers including through pension and insurance funds want to invest. Both local and foreigners need well run and liquid markets that will channel capital efficiently to the most productive.