LEGAL NOTICE NO.

…125…… 19th July, 2002

THE CAPITAL MARKETS (LICENSING REQUIREMENTS)

(GENERAL) REGULATIONS, 2002
PART I - PRELIMINARY
1—Citation.
2—Interpretation.
PART II - SECURITIES EXCHANGE
3—Application for approval.
4—Rules of the securities exchange.
5—Membership of securities exchange.
6—Chairman, directors and chief executive.
7—Requirements for approval of a securities exchange trading system.
8—Submission of annual budget.
9—Self regulation.
10—Records to be maintained.
11—Deleted by L.N 88/2012
12—Reporting obligations.
13—Listing of securities by a securities exchange.

PART III - STOCKBROKERS AND DEALERS

14—Application for licence.
15—Specific requirements for approval.
16—Stockbrokers’ financial requirements.
17—Dealers’ financial requirements and investment limits.
18—Financial year.
19—Records to be maintained.
20—Client accounts.
21—Reporting obligations.
22—Conduct of stockbrokers and dealers.
23—Conduct of stockbrokers.
24—Prohibited dealings and associations.
25—Sale of securities.
26—Code of conduct to be approved.
27—Payment of transaction and Investor Compensation Fund fees.

PART IV - INVESTMENT ADVISERS AND FUND MANAGERS

28—Application for licence.

29—Specific requirements for approval.
30—Financial requirements.
31—Records to be maintained.
32—Reporting obligations.
33—Conduct of investment advisers and fund managers.
34—Appointment of a custodian.
35—Duties of a custodian.
36—Custodian’s records and reports.
37—Retirement of a custodian.
38—Removal of a custodian.

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 PART V - INVESTMENT BANKS
39—Application for licence and specific requirements for approval.
40—Authorised functions.
41—Membership to a securities exchange.
42—Deleted by L.N 88/2012
43—Conduct of investment banks.
44—Financial requirements.

PART VI - AUTHORISED SECURITIES DEALERS

45—Application for licence.
46—Specific requirements for approval.
47—Investment obligation and restriction on transactions.
48—Functions and membership on a securities exchange.
49—Records of transactions.
50—Report of dealing transactions.

PART VII - GENERAL REQUIREMENTS FOR LICENSING

51—Renewal of licence.
52—Determination of suitability.
53—Key personnel of full and associate members.
54—Alteration of memorandum or articles of association.
55—Qualification of Secretary.
56—Marketing securities

PART VIII - TRANSACTIONS OF LISTED SECURITIES OUTSIDE A

SECURITIES EXCHANGE
57—Nature of transaction.
58—Brokerage commission.
59—Application for approval of a private transaction.
60—Approval fee.
61—Private transactions under section 31 (1A) of the Act.

PART IX - DISSEMINATION OF INFORMATION TO THE PUBLIC

AND SHAREHOLDERS

62—Disqualification of professionals.
63—Content of public communication and circular to the shareholders.

PART X - THE INVESTOR COMPENSATION FUND

64—Contribution by licensees.
65—Management and audit of the Compensation Fund.
66—Trustees of Compensation Fund.
67—Meetings of the Compensation Fund.
68—Report to the Minister.
69—Compensation of investors.
70—Maximum compensation.

2
71—Investor Compensation Committee.
72—Notification of pecuniary loss.
73—Submission of claims.
74—Payment of claims.

PART XI - DISCLOSURE OF INFORMATION

75—Disclosure of interests in shares.
76—Furnishing of information to the Authority.
77—Preservation of financial and other records.

78—Destruction of financial and other records.

PART XII - MISCELLANEOUS PROVISIONS

79—Sanctions and financial penalties.
80—Prevention of money laundering and other illicit activities.
81---Amendment of LN 429 of 1992.
82—Revocation of LN 232 of 1994.
83—Revocation of L.N 428 of 1992.

SCHEDULES
FIRST SCHEDULE - Application form.

SECOND SCHEDULE - The Capital Markets Authority fees structure.

THIRD SCHEDULE - Disclosure by a securities exchange in the financial statements

FOURTH SCHEDULE - Disclosures by other licensees including stockbrokers,

Dealers, investment advisers, fund managers and
investment banks in the financial statements.

FIFTH SCHEDULE - Brokerage commission and fees

3
 THE CAPITAL MARKETS ACT
(Cap. 485A)

IN EXERCISE of the powers conferred by section 12(1) of the Capital Markets Act, the
Capital Markets Authority makes the following Regulations-

THE CAPITAL MARKETS (LICENSING REQUIREMENTS)

(GENERAL) REGULATIONS, 2002

PART I – PRELIMINARY

Citation. 1. These Regulations may be cited as the Capital Markets

(Licensing Requirements) (General) Regulations, 2002.
Interpretation. 2. In these Regulations, unless the context otherwise requires –

“Act” includes a reference to the Capital Markets Act and

the Regulations and Guidelines made thereunder;

“Authority” has the meaning assigned to it in the Act”

“close relation” means a relationship supported by

documentary evidence of a spouse, parent, sibling, child, father-in-
law, son-in-law, daughter-in-law, mother-in-law, brother-in-law,
son-in-law, grand child or spouse of a grandchild;

“compensation committee” means the investor compensation

committee appointed under regulation 71;

“Compensation Fund” has the meaning assigned to it in

section 2 of the Act;

“Custodian” means a bank licensed under the Banking Act or a

financial institution approved by the Authority to hold in custody
Cap. 488 funds, securities, financial instruments or documents of title to assets
registered in the name of local investors, East African investors or
foreign investors or of an investment portfolio;

“demutualization” means the separation of the ownership of an

L.N. 88/2012 exchange from the right to trade on such exchange;

“demutualized exchange” means a securities exchange in

L.N 88/2012
which ownership and rights to trade are separate;

“liquid capital” in relation to a licensed entity, means the

L.N 112/2013
amount which the liquid assets of a licensed entity exceed its

4
 liabilities, as may be prescribed by the Authority;

“private transaction” means a transfer of a listed security

outside a securities exchange authorized by the Authority from one
security holder to another whether or not it involves any
consideration or change of beneficial interest or is otherwise
authorized by the Authority under section 31 of the Act;

“professional” means a person giving an opinion in respect of

listed securities or in relation to a public offer or listing of securities
and includes -

(a) any person responsible for the

incorporation of a listed company;

(b) an advocate, auditor, accountant,

investment advisor or stockbroker,
underwriter, valuer, engineer, actuary,
analyst, economist, management
consultant; and

(c) other experts whose written opinion with

respect to the assets, products or business
affairs of the issuer appear in a prospectus
or is produced to the Authority.

“rights to trade” means the rights of access to and the use of

trading related facilities provided and maintained by a securities
exchange which a securities exchange may grant a licensee of the
Authority, subject to the rules of the securities exchange on
admission of trading participants.
No. 4 of 2000
“securities laws” means the Act, the Central Depositories Act
and the regulations and guidelines made thereunder;

“working capital” means the difference between the current

assets and current liabilities excluding clients’ accounts which shall
not fall below twenty percent of the prescribed minimum
shareholders funds or three times the monthly operating costs
whichever is higher;

PART II - SECURITIES EXCHANGE

Application for 3. (1) An application for grant of approval to operate as a securities

Approval.
exchange shall be submitted to the Authority in Form 1 set out in the First Schedule.

5
 (2) The application under paragraph (1) shall be submitted
together with -
(a)the rules, memorandum and articles of
association of the applicant which
shall be in a form that is satisfactory
L.N. 88/2012
to the Authority and restricts the
applicant to the business of operating
a securities exchange and services
incidental thereto;

(b) details of the trading system proposed

to be adopted by the applicant;

(c)the prescribed fees set out in the

Second Schedule; and

(d) such additional documents as may be

required by the Authority.

Rules of the 4. (1) The rules to be adopted by an applicant for approval to

Securities
Exchange operate as a securities exchange shall contain provisions in
Compliance with the Act on the-
L.N 88/2012
(a) admission to the listing, suspension or de-listing
of securities by the securities exchange, through a
procedure prescribed by the Authority;

(b) the conditions governing dealing in securities by

its trading participants so as to ensure protection
of the rights of investors;

(c) prompt disclosure, in a manner that is fair to all

investors, of material information of a price
sensitive nature and information likely to affect
the price of a security including fees on
management contracts, to enable appraisal of an
issue by investors;

(d) protection of investors against abuse of

confidential information, misleading information,
fraud, deceit, and other adverse practices in the
issuing and trading of securities;

(e) prohibition of market manipulation in any form;

(f) investigation into trading in securities and

6
 financial transactions of trading participants and
for conducting surprise checks on such trading
participants;

(g) suspension of trading of any security for the

protection of investors or for the conduct of
orderly and fair trading;

(h) the conduct of securities trading by trading

participants and the manner in which information
relating to transactions is to be maintained and
reported to other trading participants and
customers of the securities exchange;

(i) segregation from other business accounts of

trading participants, of customers funds and
securities;

(j) arbitration of disputes and provision for appeal to

the Authority by trading participants, investors
and listed companies;

(k) proper safe keeping of securities in its custody;

(l) carrying out of the business of the securities

exchange with due regard to interest of the
investing public;

(m) trading rights on a securities exchange;

(n) registration with the securities exchange of full

members, associate members, their
representatives, authorized clerks and dealers;

(o) conduct of trading participants, their

representatives, authorized clerks and dealers;

(p) responsibility of trading participants for the

actions of their employees and agents in their
dealings with the public; and

(q) the listing of medium and large sized companies

in the respective market segments such that
investors have a range of investment opportunities
in listed securities across all sectors of the
economy.

7
Membership of 5. (1) Trading participants of a securities exchange shall be
securities
exchange. licensees of the Authority with rights to trade at an approved
securities exchange.
L.N 88/2012
(1)A. The Authority may prescribe limits on the ownership of
a securities exchange by its trading participants.

(2) A securities exchange may, in accordance with the

procedures prescribed in its rules, admit as a trading participant, any
person who has been licensed by the Authority to exercise rights to
trade -

(a) if that person satisfies any admission requirements

of the securities exchange; and

(b) on payment of admission fee approved by the

Authority under section 29(2) of the Act,

and accord that person the applicable rights to the relevant category
of admission:

Provided that, a securities exchange may asses an

application for admission by a person seeking a licence
from the Authority and issue a confirmation that that
person shall be admitted upon securing a license from the
Authority.

(3) A trading participant of a securities exchange or a director

or a shareholder of a trading participant shall not be a director or
hold beneficial interest either directly or indirectly in more than one
trading participant of a securities exchange unless the trading
participants has been exempted by the Authority on the basis of
evidence of adequate internal controls to address conflict of interest.

(4) In case of a listed trading participant of a securities

exchange, an interest of fifteen percent or more of the voting shares
held directly or indirectly shall be deemed to be a person’s
beneficial interest for purpose of these Regulations.

Chairman and 6. (1) A securities exchange shall have a chief executive who
chief executive.
shall be in charge of the day to day operations of the securities
L.N. 88/2012 exchange and administration of sufficient professional capability to
carry out trading, clearing and compliance functions of its trading
participants and listed companies.

(2) No person shall be qualified for appointment as a chief

8
executive of a securities exchange, unless such person has –

(a) at least ten years’ experience at a senior

management level in matters relating to
law, finance, accounting, economics,
banking or insurance; and

(b) expertise in matters relating to money,

capital markets or finance.

(3) A securities exchange shall provide in its rules and

articles of association -

(a) a fixed term of office for its chairman and

chief executive, which shall include a
maximum term of office of two consecutive
years for the chairman and four years
renewable once for the chief executive.

(b) a board of directors comprising of the chief

executive of the securities exchange and at
least one third independent and non-
executive directors;

(c) a maximum two members of the board of

directors who shall be elected from among
or to represent the trading participants;

(d) the independent and non-executive

directors appointed under subparagraph (b)
shall be persons who have knowledge and
experience in investments, public service
and corporate governance and shall
represent the interests of investors and the
public interest:

Provided that prior to making any such

appointment the securities exchange shall
submit the names of the persons proposed
to be appointed as directors to the
Authority for confirmation that the
Authority has no objection to the
proposed appointments;

(e) two members of the board shall be elected

by the shareholders of the securities

9
 exchange from nominees of companies
listed on the securities exchange to
represent the listed companies.

(4) Subject to paragraph (3) (c), (d) and (e), the other persons
appointed to the board of directors shall be elected by the
Cap. 488. shareholders of the exchange in accordance with the Companies
Act.

(5) deleted by L.N 88/2012

Requirements for 7. (1) A trading system to be adopted by a securities exchange

approval of a
securities shall be approved by the Authority before such system is
exchange system implemented.

(2) The trading system referred to in paragraph (1) shall

provide trading for -
(a) a trading facility at which all bids to
purchase and offers to sell are exposed
to each other and at which members of
the public are granted an opportunity
to witness trading;

(b) a transparent and efficient pricing

mechanism which:-

(i) displays the best offer and bid

prices;

(ii) provides for automatic

matching;

(iii) displays the highest and lowest

prices, the latest transactions as
well as the volume of
securities traded;

(iv) has an audit trail and trace

back mechanism for all
transactions;

(v) has sufficient internal controls

and security measures to
ensure that only authorized
persons have access;

(vi) provides for integration with a

10
 central depository system; and

(vii) maintains records of all

transactions and retrieves such
records as may be necessary.

Submission of 8. (1) A securities exchange shall submit its annual budget to the
annual budget.
Authority not later than thirty days before the commencement of its
financial year.

(2) Any revisions to the budget shall be submitted to the

Authority not later than fifteen days before the commencement of its
financial year.

(3) The annual budget shall -

(a) disclose details of revenue and

expenditure as prescribed under
these Regulations.

(b) make provision for a minimum of

twenty percent of the total annual
listing fees receivable each
financial year to support the
development of the securities
exchange infrastructure and
investor education programme.

Self- Regulation. 9. (1) Every securities exchange shall have:-

(a) a procedure and appropriate

L.N. 88/2012 system of exercising self
regulation over its trading
participants;

(b) a code of conduct for its trading

participants;

(c) adequate trading surveillance and

compliance capacity; and

(d) a procedure for dispute resolution.

(2) A securities exchange shall implement a system of self-

regulation with respect to its trading participants and shall ensure the
day to day management of trading, settlement, delivery and all other

11
activities of its trading participants are in accordance with—

(a) the rules of the securities exchange approved

by the Authority; and
(b) laws, regulations and guidelines relating to
securities issued by the Authority.

(3) The rules of a securities exchange shall, where applicable,

support the self-regulatory functions of the securities exchange and
in particular shall be designed to—

(a) promote investor protection;

(b) promote fair treatment of its trading participants

and any person who applies for admission as a
trading participant;

(c) exclude a person who is not fit and proper from

being its trading participant or being appointed
as its chief executive, director or officer

(d) promote proper regulation and supervision of its

trading participants;

(e) promote appropriate standards of conduct of its

trading participants;

(f) manage any conflict of interest which may arise

between its interest and the interest of investors
and the general public;

(g) ensure that its trading participants and officers

duly comply with the securities laws, regulations
and guidelines issued by the Authority and
where relevant, the rules of the securities
exchange, or approved central depository;

(h) require trading participants to report in a timely

manner any breaches of applicable rules;

(i) prevent the use of any information by its trading

participants or officers which may result in such
trading participants or officer making an unfair
gain;

(j) expel, suspend, discipline or sanction a trading

12
 participant if a trading participant contravenes
securities laws, regulations and guidelines
issued by the Authority or where relevant, the
rules of the securities exchange, or an approved
central depository;

(k) require a trading participant to report any

action, restriction or limitation imposed on its
operations by another securities exchange,
central depository or the Authority; and

(l) allow an aggrieved trading participant to appeal

against any decision of the securities exchange
acting in its capacity as a recognized self-
regulatory organization.”

(4) An applicant shall, as a condition for approval to operate a

securities exchange—

(a) exercise self regulatory responsibility over

its trading participants; and

(b) put in place independent management of

and budgetary structures for the commercial
and regulatory functions of the securities
exchange.”

Records to be 10. Every securities exchange shall maintain and preserve

maintained.
the following records and documents, for a period of seven years –

(a) minutes of the meetings of-

L.N 88/2012 (i) its shareholders;

(ii) its board of directors; and

(iii) any standing committee or

committees of its board of
directors;

(b) register of trading participants including

the full names and physical addresses of
all directors and shareholders of such
trading participants;

13
(c) register of representatives, authorized
clerks, dealers, authorized assistants and
floor traders;

(d) record of securities transactions by sectors

for each market segment;

(e) statistical information on market turnover

and capitalization on a monthly basis for
each market segment;

(f) register of -
(i) all listed securities including
the names of issuers and
number of securities listed by
each issuer;

(ii) all substantial shareholders;

(iii) holders of notifiable
interest under regulation 75.

(g) records of receipts and disbursement of

the investors compensation fund;

(h) annual audited accounts of its trading

participants;

(i) annual reports of all listed companies;

(j) records containing any trading limits,

margin requirements or related financial
and operational limits it imposes on its
trading participants on a monthly basis;

(k) financial records of all transactions of the

securities exchange including receipts and
payouts, cash and bank transactions which
shall also be maintained in an electronic
form including:

(i) ledgers;

(ii) journals; and

(iii) bank statements and

reconciliation accounts.

14
Deleted by L.N 11.
88/2012

Reporting 12. (1) A securities exchange shall within four months after the
obligations.
end of each financial year make available to the Authority, and to
the investors, a summary of information on companies listed at the
securities exchange.

(2) The information referred to in paragraph (1) shall include

the-
(a) published accounts of companies listed on such
securities exchange including balance sheet
and profit and loss statements;

(b) date of incorporation, date of listing, names of

directors, share capital, number and value of
shares issued, and any changes in the share
capital;

(c) details of securities transacted and the prices

(high, low and mid-market) at which such
securities have been transacted during the year;
and

(d) earnings per share, dividend per share,

shareholding structure (institutional, individual
and foreign investors), principal or controlling
shareholders and total number of shareholders.

(3) A securities exchange shall maintain information in both

print and electronic form, regarding each company listed at the
securities exchange and such information shall include the -

(a) name of the issuer and date of

incorporation;

(b) date of listing;

(c) names of directors;

(d) principal/controlling shareholders;

(e) total number of shareholders;

15
 (f) authorized and paid-up share
capital;

(g) changes in authorized or paid-up

share capital;

(h) core and auxiliary line of business;

(i) balance sheet and profit and loss

accounts for the last five years;

(j) volume and price movements (high

and low) of the listed security; and

(k) earnings per share and dividend per

share.

(4) A securities exchange shall, by the last day of March in

each year, furnish the Authority with a report of its activities during
the preceding calendar year and such report shall contain
information on -

(a) changes in its rules and by-laws, if

any;

(b) changes in the membership of its

board of directors;

(c) composition and mandates of all

the committees set up and changes
(if any) in the membership of its
existing ones;

(d) admission, suspension or expulsion

L.N 88/2012 of trading participants;

(e) disciplinary action against trading

participants including appointment
of statutory manager;

(f) arbitration of disputes;

(g) securities listed, suspended or de-

listed;

16
 (h) market turnover and capitalization
per sector; and

(i) any other matters that the Authority

may request.

(5) A securities exchange shall submit to the Authority,

through electronic means, and make public a daily report on the
securities transacted, the price movements on each security
including low, high and average prices, and the volume of
transactions in each security.

(6) A securities exchange shall furnish the Authority within

thirty days after the end of each quarter, a report of all securities
transactions for each day, including private transactions, the value of
each transaction, names of the parties for each private transaction
and the holders of notifiable interest disclosed to the securities
exchange under Part XI of these Regulations;

(7)(a) A financial statement of a securities exchange shall

include the disclosures prescribed in the Third Schedule to these
Regulations.

(b) The annual accounts of a securities exchange shall be

audited by an independent auditor appointed by the board of
directors with the consent of the Authority and such auditor shall not
be removed without the approval of the Authority;

(8) A securities exchange shall furnish the Authority with all

documents and notices that it issues to its members in connection
with the annual general meetings within ten days prior to the date of
such meetings.

(9) Communication to investors shall be by way of publication

in at least two daily newspapers of national circulation.

(10) A securities exchange shall immediately report to the

Authority by telephone and in writing whenever-

(a) there is a delay in the opening or closing of the

securities exchange;
(b) there is a default on settlement and delivery;

(c) trading is to be suspended in any security;

(d) there are incidences of violation of the Act or

17
 the securities exchange rules;

(e) there is unusual activity in the market;

(f) the securities exchange receives any non-public

information that its chief executive believes
could have a material effect on the market in
general or on any specific securities; or

(g) the Authority requests for any information.

Listing of 13. (1) No securities exchange shall admit to listing a security

securities by a
securities which has not been approved for listing by the Authority.
exchange.
(2) A securities exchange shall admit to listing without any
other conditions all securities approved by the Authority arising out
of :-

Amended by LN (a) a public offer, on attainment of the

32/2008
commencement total minimum subscription of shares
date 14th March, as disclosed in the prospectus
2008 approved by the Authority and
minimum number of shareholders
prescribed for the respective market
segment;

(b) an introduction;

(c) rights issue;

(d) scrip dividend offer; or

(e) capitalization of reserves.

(3) A securities exchange shall provide in its listing rules and

with respect to each market segment the procedure for admission to
listing of securities approved for listing by the Authority.

PART III - STOCKBROKERS AND DEALERS

Application for 14. (1) An application for a licence to operate as a stockbroker

license.
or a dealer shall be submitted to the Authority in Form 1 set out in
the First Schedule.

(2) The application referred to in paragraph (1) shall be

accompanied by -

18
 (a) the prescribed fees set out in the
Second Schedule; and

(b) the documents, information and declarations specified in

regulation 15.
Specific 15. (1) The application under in regulation 14 shall be submitted
requirements for
approval. together with -
(a) the certificate of incorporation;

(b) the memorandum and articles of association;

(c) a statement of the un-audited accounts for

the period of the accounting year ending not
earlier than six months prior to the date of
application and audited accounts for the
preceding two years (where applicable);

(d) a business plan containing the particulars on

(i) the management

structure;

(ii)the directors, including

one or more executive
directors, their
qualifications,
addresses and details
of other directorships;

(iii)the shareholding
structure which shall
disclose whether any
of the shareholders
will have an executive
role to oversee the day
to day operations of
the business;

(iv) the shareholding

structure of a dealer;

L.N. 99/2009 (v) the evidence of paid up

share capital of a
minimum amount of fifty
million shillings in the
case of a stockbroker and

19
 twenty million shillings in
the case of a dealer;

(vi) the qualifications,

experience and
expertise of the chief
executive must be
relevant to effectively
manage or operate the
business of a
stockbroker or dealer;

(vii) the proposed

management and
qualifications of key
personnel;

(viii) the financial

projections for three
years;

(ix) the proposed

information
L.N 88/2012
technology and access
to the trading network
in compliance with the
trading, clearing,
delivery and settlement
requirements of the
securities exchange to
which the applicant
intends to be admitted
as a trading participant
under these
Regulations;

(x) one bank reference;

(xi) two business

references;

(xii) the proposed

premises suitably
located and equipped
to provide satisfactory
service to clients in the

20
 field of activity to
which the licence
relates or evidence
acceptable to the
Authority that such
premises will be
available;

(xiii) the staff capable

of providing
professional services
to clients in the field of
activity to which the
licence relates or
evidence acceptable to
the Authority that such
staff will be available;

(xiv) the proposed

independent auditor;
and

(xv) a declaration
that no person is a
director or holds
L.N 88/2012 beneficial interest
either directly or
indirectly in more than
one trading participant
of a securities
exchange.

(2) Every person who is, or is to be, a director, chief

executive, manager or floor dealer of a stockbroker or dealer shall be
fit and proper to hold the particular position that he holds or is to
hold.

(3) The applicant under paragraph (1) shall –

(a) lodge a security of one million,

five hundred thousand shillings or
such higher amount with a securities
exchange; or a central depository
(as the Authority may determine,
taking into account the financial
position and settlement record of the

21
 applicant); or

(b) provide a guarantee or a security to

a securities exchange or a central
depository in a form acceptable or
approved by the Authority in
respect of which it is a trading
participant or has applied for
admission as a trading participant.

(4) The eligibility of a dealer’s licence shall be restricted to

institutions committing funds for investment as principals in
securities dealings.

(5) Deleted by L.N 155/2017

(6) Deleted by LN. 88/2012

(7) Deleted by L.N 155/2017

(8) Deleted by L.N 155/2017

(9) Deleted by L.N 155/2017

(10) An application for a stockbroker or a dealer license shall

L.N 88/2012 be accompanied by a letter from the securities exchange stating that
the applicant meets all the relevant requirements of that securities
exchange and that the securities exchange would admit the applicant
if licensed by the Authority.

Stockbrokers’ 16. (1) The level of shareholders’ funds (paid up share capital
financial
requirements. and reserves) for stock brokers shall not fall below fifty million
shillings at any time during the license period.
L.N. 99/2009

L.N 88/2012 (2) The minimum paid up share capital shall always be
unimpaired and shall not be advanced to the directors or associates
of the stockbroker.

L.N 112/2013 (3) A stockbroker shall maintain a liquid capital of thirty million
shillings or eight per cent of its total liabilities, whichever is higher.

(4)
Deleted by LN
112/2013
Deleted by LN (5)
112/2013

22
Dealers’ financial 17. (1) The level of shareholders funds (paid up share capital and
requirements and
investment limits. reserves) shall not be below twenty million shillings, at any time
during the licence period.

(2) A dealer shall:-

(a) set aside investment capital of
not less than twenty million
shillings [except as provided
under paragraph (3) ] in cash
or portfolio of listed securities,
or such higher amount as may
be prescribed by the Authority;
and
Deleted by LN
112/2013 (b)

(3) Where a dealer is promoted by a stockbroker through a

subsidiary, the minimum investment capital committed to dealing
operations by the subsidiary shall not be less than five million
shillings in cash or listed securities portfolio at market value or such
higher amount as may be prescribed by the Authority.

(4) A dealer shall maintain a liquid capital of thirty million

L.N 112/2013 shillings or eight per cent of its total liabilities, whichever is higher.

(5)
Deleted by LN
112/2013

Deleted by LN (6)
112/2013

(7) A dealer shall maintain an investment portfolio out of it’s

investment capital equivalent to a minimum monthly average of fifty
percent in listed equities and the remainder in listed fixed income
securities provided that within twelve months from the date of these
Regulations, the investment of the minimum monthly average in
listed equities shall be adjusted to sixty percent.

(8)(a) At least an average of twenty five percent of the portfolio

of securities held by a dealer shall be turned over every quarter and
seventy five percent of the portfolio be turned over every twelve
months;

(b) Every security held by a dealer shall be turned over at least

once every eighteen months.

(9) For the purposes of this regulation “turnover” means the

23
 value of securities purchased or sold during the period.

Financial year. 18. The financial year of stockbrokers and dealers shall end on
st
the 31 of December in each year.

Records to be 19. (1) A stockbroker and dealer shall maintain and preserve
maintained.
for a period of seven years, the following accounting documents –

(a) journals or other records of

original entry containing an
itemized daily record of all
purchases and sales of
securities, all receipts and
deliveries of securities
(including certificate
numbers), all receipts and
disbursements of cash and all
debits and credits; the records
shall show the account for
which each transaction was
effected, the name and amount
of securities, the unit and
aggregate purchase or sale
price (if any), the trade date
and the name or other
designation of the person from
whom the securities were
purchased or received or to
whom they were sold or
delivered;

(b) ledgers, (or other records)

reflecting all assets and
liabilities, income, expense and
capital accounts;

(c) detailed records of nominee

accounts;

(d) all cheque books, bank

statements, cancelled cheques
and bank reconciliation
accounts;

(e) clients’ accounts (or other

records) itemizing separately

24
 each account of a client, all
purchases, sales, receipts and
deliveries of securities and all
other debits and credits;

(f) a memorandum of each

client’s order received for the
purchase or sale of securities;
the memorandum shall show
orders in chronological
sequence, the time of receipt,
the terms and conditions of the
order or instructions and of any
modification or cancellation
thereof, the account for which
the order was entered, the time
of entry into the market for
execution, the price at which
the order was executed and, to
the extent feasible, the time of
execution or cancellation;

(g) copies of confirmation of all

purchases and sales, notices of
all other debits and credits for
securities and other items for
the account of client;

(h) records on all commissions

earned on account of equities,
bonds and others;

(i) contract books or records,

showing details of all contracts
entered into with trading
L.N 88/2012 participants of a securities
exchange and duplicates of
memoranda of confirmation
issued to such other trading
participant; and

(j) any other accounting

documents as may be
determined by the Authority.

(2) The accounting documents specified under paragraph (1)

25
 shall be subject to inspection from time to time and without notice,
L.N 88/2012 by the Authority or securities exchange of which the stockbroker or
dealer is a trading participant.

(3) A stockbroker shall maintain and preserve for each person

who becomes a client, records and accounts for a period of seven
years containing information on -

(a) where the client comes through an investor

agent, in the agent sub-account and where the
client has been attended to by the supervisor
or employee of the stockbroker authorized to
attend to clients in the stockbroker’s account,
the client’s name, date of birth, address,
nationality or citizenship, identification,
written instructions of the client, price limit,
duration of the instructions and date of order
and the name and address of the investor
agent (where applicable) and where the client
is a company, certified copies of
memorandum and articles of association and
the certificate of incorporation.

(b) if the stockbroker, or any of its agents has

made any recommendations to the client to
purchase or sell any security, the record of
such client shall include the client’s
occupation, identification, investment
objectives, other information concerning the
client’s financial situation and needs which
the stockbroker or any of its agents
considered in making the recommendation,
and the signature and name of the agent who
made the recommendation to the client and
the date when any order was given to the
stockbroker or its agent and any price limit
given.

(c) A record or records with respect to each

discretionary account shall include:

(i) the client’s written

authorization to the
stockbroker to exercise
discretionary power or

26
 authority in the client’s
account;

(ii) the reason given by the

client for granting
discretionary power or
authority in his
account; and

(iii)the written approval of

the stockbroker’s
designated supervisor
of each transaction in
such account indicating
the exact time and date
of such approval;

(d) a separate record for all complaints by clients

and persons acting on behalf of clients; the
complaints shall be filed alphabetically by
clients’ names and shall include copies of all
materials relating to the complaint, and record
of what action, if any has been taken by the
stockbroker; copies of such materials and
record of action taken shall be kept in the
office through which the client’s account is
handled;

(e) a separate record of all securities transactions

by the stockbroker’s or dealer’s employees
and directors in their own name or under
nominees accounts;

(f) a separate record of all securities transactions

between the stockbroker or dealer, and all
listed companies in which the directors of the
stockbroker or dealer have an interest; and

(g) such other records as the Authority shall

determine from time to time.

(4) A stockbroker shall decline to take an order if, after

reasonable inquiry, the client decline to furnish such items of
information as required in paragraph (3) (a), (b and (c) and a
statement to that effect is placed in the records, provided, however,
that the client’s records shall state the client’s name and address.

27
Client accounts 20. A stockbroker shall -
(a) deposit clients’ funds in one or more
bank account(s), which account(s)
shall contain only clients’ funds and
be clearly marked “clients’ accounts”.
Such client accounts shall not be
overdrawn for any reason.

(b) maintain a separate record for each

account showing the name and
address of the bank where the account
is maintained, the dates, amounts of
deposits and withdrawals and also the
exact amount of each client’s
beneficial interest in the account.

(c) reconcile such accounts on a regular

basis to ensure the amount indicated
corresponds with the balances in the
client account at any given time; and

(d) ensure that clients’ orders for

payments made in advance shall be
executed according to clients’
instructions and in any event not later
that one month from the date of
receipt of the clients’ funds. Orders
not executed within one month for
whatever reason shall be renewed by
fresh instructions from the client.

Reporting 21.(1) Every stockbroker and dealer shall submit to the Authority
obligations.
and to the securities exchange of which they are trading
L.N 88/2012 participants:

(a) quarterly reports and accounts within

fifteen days of the end of each calendar
quarter;

(b) half yearly reports and accounts within

thirty days of the end of each half year;
and

(c) audited annual accounts within three

28
 months following the end of the
stockbroker and dealer’s financial year.

(d) a financial statement complying with the

disclosures prescribed under the Fourth
Schedule of these Regulations.

(e) Every stockbroker or dealer shall prepare

monthly reports and accounts within
L.N. 99/2009 fifteen days of the end of each calendar
month which shall be made available to
the Authority at such times as the
Authority may request.

(2) The Authority may require such other form of financial

statement as it may from time to time specify.

Conduct of 22. Stockbrokers and dealers shall -

stockbrokers and
dealers
(a) operate independently of any other
stockbroker or dealer;

(b) conduct the business efficiently, honestly, and

fairly, with the integrity and professional skills
appropriate to the nature and scale of
activities;

(c) have no formal or informal agreement with a

trading participant of the same securities
L.N 88/2012
exchange whether through an association or
not, relating to the stockbroker’s or dealer’s
trading activity, personnel, commissions or
any joint activity that is likely to undermine
the competitiveness or fair trade practices and
service to clients.

(d) without prejudice to the generality of

paragraph (b), in consideration whether a
stockbroker or dealer is conducting or will
conduct business efficiently, honestly and
fairly, regard shall be made to the management
and organizational structure, reporting
principles and procedures, internal audit
procedures, procedures for compliance with
the securities laws and risk management
policies which the stockbroker or dealer has

29
 adopted or proposes to adopt for its business.

Conducting 22A.(1) A stockbroker may conduct business through a

business through a
stockbroking agent stockbroking agent provided the stockbroking agent has been
contracted in writing to render such services.
L.N 99/2009
(2) Every stockbroker shall forward to the Authority, on an
annual basis, a register of any stockbroking agents contracted
pursuant to paragraph (1) and shall notify the Authority of any
amendment to the register of agents within five working days of
such change.

(3) A stockbroker shall be responsible for conducting all

necessary due diligence to establish the competence, fitness and
propriety of any person to be appointed as a stockbroking agent,
having specific regard to the past experiences and conduct of any
such person, in establishing his capacity to facilitate the purchase
and sale of securities as an agent of the stockbroker in the best
interests of investors.

(4) A stockbroker shall submit to the Authority for approval

the standard form agency agreement they propose to enter with their
stockbroking agents and shall thereafter secure the approval of the
Authority prior to amending such agreement.

(5) A stockbroker shall not appoint as its agent any person

already appointed by another stockbroker as its agent:

Provided that where a stockbroker who, at the

commencement of this provision, has appointed an
agent who acts for more than one stockbroker shall,
within six months of the commencement, comply
with the requirements of this provision.

(6) A stockbroking agent shall not handle or deal with clients’

funds.

(7) The stockbroker shall be responsible for ensuring that the

stockbroking agent conducts its business efficiently, honestly and
fairly with the integrity and professional skills appropriate to the
nature and scale of activities and in accordance with the
requirements of the Capital Markets Act and Regulations issued
thereunder.

(8) In the event of any misconduct by the stockbroking agent,

the stockbroker who appointed the stockbroking agent shall report

30
 the misconduct to the Authority within forty-eight hours of the
occurrence of the misconduct.”

Conduct of 23. A stockbroker shall -

stockbroker.
(a) execute an order only where the client has made
sufficient arrangements for funds or securities with
the stockbroker.

An “order” for the purpose of this regulation, shall

constitute written instructions by a client to a
stockbroker as to the security name, quantity, price
or price limits and duration or validity of
instructions.

(b) only accept written orders and shall ensure that the
client is not only capable of honouring the order
before acting on the order, but has made
arrangements with the stockbroker for fulfillment of
its obligations arising from such order.

(c) execute clients’ orders in the chronological

sequence of orders received and which have been so
recorded in accordance with these Regulations and
shall give priority to orders of clients over orders of
any shareholder or employee of the stockbroker or
related dealer subsidiary, whether directly or
indirectly.

(d) maintain a daily record of orders received from

clients showing the name of each client, the specific
order and time the order was given, and execute the
same in order of receipt.

(e) exercise due diligence and care at all times so as not

to misinform or misdirect clients.

(f) while accepting an order from a client, inform the

client of all constituent parts of an order prior to
executing the order and get the client to give a
written declaration to confirm the same.

(g) provide factual and accurate information to clients’

31
 through newsletters and advertisements;

(h) not recommend to a client the purchase, sale or

exchange of any security without reasonable
grounds to believe that the recommendation is
suitable for the client on the basis of information
furnished by the client after reasonable inquiry
concerning the client’s investment objectives,
financial situation and needs, and any other
information known or acquired by the stockbroker
after reasonable examination of the client’s
financial records.

Prohibited 24. (1) No stockbroker or dealer shall:-

dealings.

(a) create a false market in any listed security

by way of associations. any artificial device
including but not limited to advising clients
to buy or sell a particular security while
selling or buying through its dealing or
related party transactions, without
disclosing that fact to the investors;

(b) establish a corner or trade where a corner

has developed in a listed security;

(c) negotiate on any issue relating to trading

with any other person on the trading floor
of the securities exchange;

(d) be party to any trading and price

manipulative scheme or device which may
directly or indirectly influence or interfere
with the market price formation and fair
trading process with respect to any listed
security;

(e) make general recommendations to the

public on particular securities through
publications or statements; or

(f) sell securities which are not registered in

the name of the stockbrokers’ client or
central depository in the case of a

32
 depository environment.

For the purposes of this regulation, “a corner” shall be deemed to

arise when a single interest or group has acquired such control of
any listed security that the same cannot be obtained except at prices
or on terms dictated by such single interest or group.

Sale of securities. 25.(1) No stockbroker or dealer shall sell securities unless,

at the time of the sale -
(a) the stockbroker or dealer has or, in the
case of a stockbroker, its client has; or

(b) the stockbroker or dealer believes on

reasonable grounds, that it has, or in
the case of a stockbroker, its client
has, an existing exercisable and
unconditional right to vest the
securities in a purchaser of the
securities.

(2) A person who, at any particular time, has an existing

exercisable and unconditional right to have securities vested in him
or in accordance with his directions shall be deemed to have at that
time a presently exercisable and unconditional right to vest the
securities in another person.

(3) A right of a person to vest securities in another person

shall not be deemed not to be unconditional by reason only of the
fact that the securities are charged or pledged in favour of another
person to secure the repayment of money.

(4) For purposes of this Part, a person shall be deemed to

sell securities where he –

(a) purports to sell securities;

(b) offers to sell securities;

(c) holds himself out as entitled to sell

securities; or

(d) instructs a stockbroker to sell securities.

Code of conduct. 26. (1) Any proposed code of conduct or agreements to self
regulate to be approved the operations of stockbrokers and dealers,
shall be submitted to the Authority for prior approval and must be

33
 consistent with these Regulations.

(2) No code of conduct of any associations or agreements of

stockbrokers or dealers whether in written form or not shall seek to
L.N 88/2012 restrict free negotiation or competition by trading participants with
regard to commissions payable on any transactions as provided in
the Fifth Schedule.

Payment of 27. All stockbrokers and dealers shall pay to the Authority
transactions.
and to the securities exchange of which they are trading participants
the fees prescribed as payable by and investor every buyer and seller
of a security and shall pay to the investor compensation fund the
L.N 88/2012
fees prescribed as payable by each buying and selling stockbroker,
fund fees or dealer within fifteen days following a transaction.
PART IV - INVESTMENT ADVISERS AND FUND
MANAGERS

Application for 28.(1) An application for a licence to operate as an investment

licence.
adviser or fund manager shall be submitted to the Authority in
duplicate in Form 1 set out in the First Schedule.

Specific 29.(1) The application under regulation 28 shall be accompanied

requirements for
approval. with -

(a) certificate of incorporation;

(b) memorandum and articles of association;

(c) a statement of the un-audited accounts for

the period of the accounting year ending
not earlier than six months prior to the date
of application and the applicant’s audited
accounts for the preceding two years
(where applicable);

(d) a business plan containing the particulars

on -

(i) the management structure;

(ii) the directors, including one

or more executive directors,
their qualifications,
addresses and details of
other directorships;

34
(iii) the shareholding structure,
disclosing whether any of
the shareholders will have
an executive role to oversee
the day-to-day operations
of the business;

(iv) the evidence of a minimum

paid-up share capital of not
less than two million five
hundred thousand shillings
for investment advisers and
ten million shillings for
fund managers;

(v) the qualifications,

experience and expertise of
the chief executive;

(vi) the proposed management

and qualifications of key
personnel;

(vii) the financial

projections for three years;

(viii) the particulars of the

proposed operating and
information technology
system;

(ix) one bank reference;

(x) two Business references;

(xi) the proposed premises

suitably located and
equipped to provide
satisfactory service to
clients in the field of
activity to which the licence
relates or evidence
acceptable to the Authority
that such premises will be
available;

35
 (xii) the staff capable of
providing professional
services to clients in the
field of activity to which
the licence relates or
evidence acceptable to the
Authority that such staff
will be available;

(xiii) the proposed

independent auditor.

(e) the fees prescribed in the Second

Schedule.

(2) Every person who is, or is to be, a director, chief

executive or manager of an investment adviser or fund manager,
shall be fit and proper to hold the particular position which he holds
or is to hold;

(3) A person shall not carry on or hold out himself as

Inserted by L.N
32/2008 carrying on the business of a fund manager of a registered venture
capital company unless that person is a fund manager licensed a
licensed by the Authority.

(4) An application for a licence under paragraph (3) shall be

made to the Authority in writing and be accompanied by-

(a) a detailed information on qualifications,

experience and expertise of the directors, chief
executive and senior investment in managing
venture capital investments and private equity;
and

(b) information proving ability to provide

technical and managerial expertise to eligible
venture capital enterprises.

(5) The Authority shall publish the names of all fund

managers it has licensed to manage registered venture capital
companies in the Kenya Gazette.

Financial 30. (1) The level of shareholders funds (paid up share capital
requirements.
and reserves) for investment advisers, shall not fall below two
million five hundred thousand shillings at any time during the
licence period.

36
 (2) The level of shareholders funds (paid up share capital
and reserves) for fund managers, shall not fall below ten million
shillings at any time during the licence period.

(3) The paid up share capital of the investment advisor or

fund manager shall always be unimpaired and shall not be advanced
to the directors or associates of the investment advisor or fund
manager.

(4) An investment adviser shall maintain a liquid capital of one

LN 112/2013 million shillings or eight percent of its total liabilities, whichever is
higher, and a fund manager shall maintain a liquid capital of five
million shillings or eight percent of its total liabilities, whichever is
higher.

(5)
Deleted by LN
112/2013 (6)
Deleted by LN
112/2013 (7) The size of the aggregate maximum value of all clients’
portfolio managed under the investment adviser’s licence as
prescribed shall not exceed ten million shillings and any amount in
excess of the prescribed aggregate limit shall be managed under the
fund manager’s licence.

Records to be 31. (1) Every investment adviser and fund manager shall maintain
maintained.
and preserve for a period of seven years, the following records -

(a) journals, including cash receipts and

disbursement records and any other
records or original entry, forming the basis
of entries in any ledger;

(b) general and auxiliary ledgers, or other

comparable records reflecting assets,
liabilities, reserves, capital, income and
expense accounts;

(c) a record or memorandum of each order

given by the investment adviser or fund
manager for the purchase or sale of
securities, or any instruction received by
the investment adviser or fund manager
from the client concerning the purchase,
sale, receipt or delivery of a particular
security and of any modification or

37
 cancellation or any such order or
instruction, and the record shall –

(i) show the terms and

conditions of the order,
instruction, modification
or cancellation;

(ii) identify the person

connected with the
investment adviser or
fund manager who
recommended the
transaction to the client
and the person who
placed such order;

(iii)show the account for

which the order was
entered, the date of entry,
and the stockbroker by or
through whom the order
was executed, where
appropriate; and

(iv) show orders entered

pursuant to the exercise of
discretionary power on
account of management
of investment portfolios
in which case a record of
details of such contracts
with clients, constituents
of the portfolio,
transaction fees agreed
with the client and value
of the portfolio shall be
included.

(d) all cheque books, bank statements,

cancelled cheques and cash reconciliation
of the investment adviser or fund manager;

(e) all bills, statements or copies thereof, paid

or unpaid relating to the business of the

38
 investment adviser or the fund manager;

(f) originals of all written communication

received from clients and copies of all
written communication sent by the
investment adviser or fund manager
relating to-

(i) any recommendations

made or proposed to be
given;

(ii) any receipts,

disbursement or
delivery of funds or
securities; and

(iii) the placing or

execution of any order
to purchase or sell any
security; provided, that
if the investment
adviser or fund
manager sends any
notice, circular or other
advertisement offering
any report, analysis,
publication or other
investment advisory
services to more than
ten persons, the
investment adviser or
fund manager shall not
be required to keep a
record of the names and
addresses of the
persons to whom it was
sent except that if such
notice, circular or
advertisement is
distributed to persons
named on any list, the
investment adviser or
fund manager shall
retain a copy of such
notice, circular or

39
 advertisement, a record
or memorandum
describing the list and
the source thereof;

(g) a list or other record of all accounts in

which the investment adviser is vested
with any discretionary power with respect
to the funds, securities or transactions of
any client;
(h) all evidence of granting of any
discretionary authority by any client to the
investment adviser, or copies thereof;

(i) all written agreements or copies thereof

entered into by the investment adviser or
fund manager with any client or otherwise
relating to the investment adviser’s or fund
manager’s business;

(j) a copy of each notice, circular,

advertisement, newspaper article,
investment letter, bulletin or other
communication recommending the
purchase or sale of a specific security,
which the investment adviser or fund
manager circulates or distributes, directly
or indirectly, to ten or more persons, and if
such notice, circular, advertisement,
newspaper article, investment letter,
bulletin or other communication does not
state the reasons for such recommendation,
a memorandum from the investment
adviser or fund manager (as the case may
be) indicating the reasons thereof; all
advertisements by the investment adviser
or fund manager and all records,
worksheets and calculations necessary to
form the basis for performance data in
such advertisements;

(k) a record of every transaction in a security

in which the investment adviser or fund
manager or any of the investment adviser
or fund manager’s employees acquire any
direct or indirect beneficial ownership; the

40
 record shall state the title and amount of
the security involved, the date, whether the
transaction was a purchase or sale or other
acquisition or disposition, the price at
which it was effected, and the name of the
stockbroker with or through whom the
transaction was effected; and

(l) a copy of each written statement, the

amendment or revision thereof, given or
sent to any client or prospective client of
such investment adviser or fund manager
and a record of the dates that the same was
given or offered to be given;

(m) any other records as may be determined by

the Authority.

(2) The records specified under paragraph (1) shall be

subject to inspection from time to time and without notice, by the
Authority.

(3) Each investment adviser and fund manager shall

preserve and maintain clients’ records of securities or funds and if
required produce for inspection by the Authority such books,
records and ledgers, or other accepted accounting and additional
records as may be required by the Authority for a period of seven
years and shall -
(a) notify the Authority of the
custodian appointed; and

(b) segregate the securities of each

client and mark such securities
to identify the particular client
having the beneficial interest
therein.

Reporting 32.(1) Every investment adviser or fund manager shall submit

obligations.
to the Authority -
L.N. 99/2009. (a) Quarterly management accounts and
reports of the portfolio under its
management within fifteen days of the
end of each calendar quarter.

Provided that every investment adviser or

fund manager shall prepare monthly

41
 reports of the portfolio under its
management within fifteen days of the
end of each calendar month which shall be
made available to the Authority at such
times as the Authority may require.

(b) half yearly reports of the portfolio under

its management within thirty days of the
end of each half-year, including reports
of its own financial performance;
(c) annual reports of the total value of the
portfolio under its management
including the number of clients; and

(d) audited annual accounts for its

operations in the form prescribed in the
Fourth Schedule within three months
following the closure of the financial
year;

(2) Notwithstanding the provisions of paragraph (1), the

Authority may require such other form of financial statement as it
may from time to time specify.
Conduct of 33. (1) No investment adviser or fund manager shall -
investment
advisers and fund
managers. (a) recommend to a client to whom
investment, supervisory, management or
consulting services are provided, the
purchase or sale of any security without
reasonable grounds to believe that the
recommendation is suitable for the client
on the basis of information furnished by
the client after reasonable inquiry
concerning the client’s investment
objectives, financial situation and needs,
and any other information known or
acquired by the investment adviser or fund
manager after reasonable examination of
the client’s financial records;

(b) place an order to purchase or sell a security

for the account of a client without written
authority to do so;

(c) place an order to purchase or sell a

security for the account of a client upon
instruction of a third party without first

42
 having obtained a written third-party
authorization from the client;

(d) exercise any discretionary power in

placing an order for the purchase or sale of
securities for a client without obtaining
written discretionary authority from the
client;

(e) induce trading in a client’s account that is

excessive in size or frequency in view of
the financial resources, investment
objectives and character of the account;

(f) misrepresent to any client, or prospective

client, its qualifications or misrepresent the
nature of the advisory services being
offered or fees to be charged for such
service or omit to state a material fact
necessary to make the statements
regarding qualifications, services or fees,
in light of the circumstances under which
they are made, not misleading;

(g) provide a report or recommendation to any

client prepared by someone other than the
investment adviser without disclosing that
fact;

(h) fail to disclose in writing before any

advice is rendered any material conflict of
interest relating to the investment adviser
or fund manager or any of the investment
adviser’s or fund manager’s employees,
which could reasonably be expected to
impair the rendering of unbiased and
objective advise, including-

(i) compensation
arrangements connected
with advisory services to
clients which are in
addition to compensation
from such clients for such
services; or

(ii) charging a client an

43
 advisory fee for rendering
advice when a commission
for executing securities
transactions pursuant to
such advice will be
received by the investment
adviser or fund manager or
his employees;

(i) guarantee a client that a specific result will

be achieved arising from the advice which
will be rendered except in the case of fixed
income securities;

(j) publish, circulate or distribute any

advertisement which does not comply with
the Act;

(k) disclose the identity, affairs, or investment

of any client to any third party unless
required by law, court order or a regulatory
agency to do so, or unless consented to by
the client; and

(l) enter into, extend or renew any investment

advisory contract unless such contract is
in writing and discloses in substance the
services to be provided, the term of the
contract, the advisory fee, the formula for
computing the fee, the amount of prepaid
fee to be returned in the event of contract
termination or non-performance, whether
the contract grants discretionary power to
the investment adviser or fund manager
and that no assignment of such contract
shall be made by the investment adviser or
fund manager without the consent of the
other party to the contract;

(m) fail to register all securities marketed and

offered to clients by the investment adviser
or fund manager or otherwise inform the
client that the securities offered to them
have not been registered with or approved
by the Authority.

44
 (2) Any information provided by investment advisers or fund
managers to clients through newsletters and advertisements shall be
factual and accurate.

(3) No investment adviser or fund manager shall loan money to

a client unless the investment adviser or fund manager is a financial
institution engaged in the business of loaning funds or the client is
an affiliate of the investment adviser or fund manager.

(4) An investment adviser or fund manager may not contract

or engage any advisory or management services on behalf of an
investment portfolio without prior written approval of its clients.
The investment adviser or fund manager shall remain liable
hereunder:-
(a) for any act or omission of
the sub-contracted
investment adviser or fund
manager;

(b) the fees and expenses of

any such person, which
shall not be payable out of
the fund of the portfolio
investments; and

(c) any expenses incurred by

any such person which if
incurred by the investment
adviser or the fund
manager would have been
payable out of the fund of
the investment portfolio.

(5) When accepting an order from a client the investment

adviser or fund manager shall inform the client of all constituent
parts of the service agreement prior to executing the order and get
the client to give it a written declaration to confirm the same.

(6) The investment adviser or fund manager shall be fair and

equitable in the event of any conflict of interest that may arise in the
course of its duties.

Appointment of a 34. (1) Every investment adviser and fund manager that
custodian.
manages discretionary funds shall appoint a custodian for the assets
of the fund.

45
 (2) A custodian of an investment portfolio may in relation to
the fund manager or investment adviser be a holding company or a
subsidiary company within the meaning of the terms as defined in
Cap. 486. section 154 of the Companies Act or be deemed by the Authority to
be otherwise under control of substantially the same persons or
consist substantially of the same shareholders, provided that the
investment in a related company shall be limited to ten percent of
the total funds managed by the fund manager.

(3) The Authority may revoke the approval of a custodian if

at any time thereafter the custodian ceases to satisfy the
requirements of these Regulations.

Duties of a 35. (1) A custodian shall render custodial services to the

custodian.
investment portfolio managed by the investment adviser or fund
manager in accordance with the written service agreement between
the custodian and the investment adviser or fund manager as the
case may be and such service shall include -

(a) taking into its custody or under its

control all the property of the clients
of the investment adviser or fund
manager and hold it in trust for the
clients in accordance with the
provisions of the written service
agreement provided that cash and
registrable assets shall be registered
in the name of or to the order of the
clients by the custodian;

(b) receiving and keeping in safe custody

title documents, securities and cash
amounts of the investment portfolio;

(c) opening an account in the name of

each client for the exclusive benefit of
such investment portfolio;

(d) transferring, exchanging or delivering

in the required form and manner
securities held by the custodian upon
receipt of proper instructions from the
investment adviser or fund manager;

(e) requiring from the investment adviser

or fund manager as the case may be,

46
 such information as it deems
necessary for the performance of its
functions as a custodian;

(f) promptly delivering to the investment

adviser or fund manager or to such
other persons as investment adviser or
fund manager may authorize, copies
of all notices, proxies, proxy
soliciting materials received by the
custodian in relation to the securities
held in the fund account, all public
information, financial reports and
stockholder communications the
custodian may receive from the
issuers of securities and all other
information the custodian may
receive, as may be agreed between
the custodian, investment adviser or
fund manager;

(g) exercising subscription, purchase or

other similar rights represented by the
securities subject to receipt of proper
instructions from the investment
adviser or fund manager;

(h) exercising the same standard of care

that it exercises over its own assets in
holding, maintaining, servicing and
disposing of property and in fulfilling
obligations in the agreement;

(i) where title to investments are recorded

electronically, ensuring that
entitlements of the clients of the
investment adviser or fund manager
are separately identified in the records
of entitlement maintained by the
custodian;

(2) A custodian shall in executing its duties under

paragraph (1) exercise the degree of care expected of a prudent
professional custodian for hire.

(3) A custodian discharging its contractual duties to an

47
 investment adviser or fund manager shall not contract agents to
discharge those functions except where a portion of the investment
portfolio is invested in offshore investments in which case the
custodian may engage the services of an overseas sub custodian
approved by the investment adviser or fund manager as the case may
be with notification of such appointment to the Authority.

(4) The agreement referred to in paragraph (1) between the

custodian and the investment adviser or fund manager shall make
provision on the computation of the fee in respect of custodial
services which will be disclosed to the clients by the investment
adviser or fund manager in the annual report.

Custodian’s 36.(1) A custodian shall keep such records as may be necessary

records and
reports. to ascertain -

(a) the entire fund of the investment portfolio held

by the custodian;

(b) each transaction carried out by the custodian

on behalf of the investment adviser or fund
manager as the case may be.

(2) The records referred to in paragraph (1) shall be

subject to inspection by the investment adviser or fund manager as
the case may be or a duly authorized agent of the Authority within
the premises of the custodian at any time during business hours.

(3) The custodian shall make available to the fund manager or

investment adviser -
(a) a written statement at agreed
reporting dates which lists all
assets of the investment
adviser or fund manager’s
clients in the clients’
account(s) together with a full
account of all receipts and
payments made and other
actions taken by the custodian;

(b) an advice or notification of

any transfers of property or
securities to or from the
investment adviser or fund
managers clients’ account(s)
and indicating the securities

48
 acquired for the account(s),
the identity of the party
having physical possession of
such securities;

(c) a copy of the most recent

audited financial statements of
the custodian prepared
together with such
information regarding the
policies and procedures of the
custodian as the investment
manager or fund manager may
request in connection with the
agreement or the duties of the
custodian under that
agreement; and

(4) The custodian shall prepare and submit to the Authority an

annual report demonstrating how compliance with these Regulations
and its service agreement have been achieved.

Retirement of a 37. (1) A custodian shall not retire voluntarily except upon the
custodian.
appointment of a successor approved by the Authority.

(2) Where a custodian desires to retire or ceases to be

registered as a custodian with the Authority, the investment adviser
or the fund manager as the case may be may, with the approval of
the Authority, appoint another eligible person to be a custodian in its
place.

Removal of a 38. (1) A custodian may be removed by the investment

custodian.
adviser of fund manager by notice in writing where -

(a) the custodian goes into

liquidation other than a voluntary
liquidation for the purpose of
reconstruction or amalgamation
or where a statutory manager or a
receiver is appointed over any of
its assets;

(b) the custodian ceases to be an

authorized depository or ceases
to carry on business as a bank or
financial institution;

49
 (c) the custodian fails or neglects
after reasonable notice from the
investment adviser or fund
manager, to carry out or satisfy
any duty imposed on the
custodian in accordance with the
agreement; or

(d) the directors of the investment

adviser or fund manager as the
case may be, by extra ordinary
resolution resolve that such
notice be given, and the
investment adviser or fund
manager with the approval of the
Authority appoints as custodian
some other qualified authorized
depository.

(2) On receipt of the notice referred to in paragraph (1)

by the investment adviser or the fund manager, the service
agreement between investment adviser or the fund manager as the
case may be and the custodian shall be deemed to have been
terminated.

(3) In the event of a termination of the service agreement

as referred to in paragraph (2) or from the date of winding up order
issued by a court against the custodian, the custodian shall hand
over, all assets, documents and funds including that from the bank
account(s) of the investment adviser or fund manager held by such
custodian to the custodian appointed in writing by investment
adviser or fund manager (as the case may be) and approved by the
Authority within thirty days from the date of such termination.

(4) The custodian shall submit to the Authority an audit

report indicating the assets, liabilities and an inventory of the
investment portfolio, securities and title documents of the assets
which have been handed over, transferred and delivered to the
appointed custodian within twenty days from the termination of the
service agreement.

PART V - INVESTMENT BANKS

Application for 39. (1) An application for a licence to operate as an investment

licence and
specific bank shall be submitted to the Authority in Form 1 set out in the

50
requirements for First Schedule.
approval.
(2) The application referred to in paragraph (1) shall be
submitted together with -

(a) the certificate of incorporation;

(b) the memorandum and articles of association;

(c) a statement of the un-audited accounts for the

period of the accounting year ending not
earlier than six months prior to the date of
application and applicant’s audited accounts
for the preceding two years (where
applicable);

(d) a business plan containing the particulars on:

(i) management and

shareholding structure of the
investment bank;

(ii) directors, including their

qualifications, addresses and
details of other
directorships;

(iii) evidence of paid up share

L.N 99/2009 capital of a minimum
amount of two hundred
and fifty million shillings;

(iv) qualifications, experience

and expertise of the chief
executive and dealers that
must be relevant to
effectively manage or
operate the business of an
investment bank;

(v) proposed operating systems

including dealing
infrastructure suitably
located and equipped to
provide satisfactory service
to clients; and

51
 (vi) staff capable of providing
professional services to
clients in the field of activity
to which the licence relates
or evidence acceptable to
the Authority that such staff
will be available.

(e) the fees prescribed in the Second Schedule.

L.N 99/2009
(f) the name of the proposed independent
auditor.

(3) An Investment Bank which intends to be admitted as a

Inserted by L.N
88/2012 trading participant at a securities exchange shall submit a letter from
the securities exchange which the applicant is seeking admission as
a trading participant confirming the admission of that applicant upon
securing a license from the Authority.

Authorized 40. Investment banks shall be non deposit taking institutions and
functions.
shall carry out all or any of the following functions:

(a) offering advisory services on-

(i) public offering of

securities;

(ii) corporate
restructuring,
takeover, mergers,
acquisitions and
privitatization;

(iii)corporate finance,
options, including
issuance of equity or
debt securities or loan
syndication.

(b) engaging in the business of stockbroker

subject to regulation 42;

(c) engaging in the business of a dealer;

(d) promoting or arranging underwriting or

52
 issuance of securities;

(e) promoting and acting as a fund manager

of collective investment schemes;

(f) providing investment advisory services

and contractual portfolio management.

Admission to a 41. (1) A person licensed by the Authority as an

securities
exchange. investment bank shall be eligible to apply for admission as a trading
participant with a securities exchange:
L.N 88/2012
Provided that the licensed investment bank complies
with the eligibility requirements of the admitting
securities exchange.

Deleted by L.N. 42.

88/2012

Conduct of 43. Investment Banks shall comply with the provisions on

investment banks.
client accounts, records to be maintained, reporting obligations,
LN. 99/2009 conduct, prohibited dealings and associations, investment
requirements and appointment of custodian, relating to stockbrokers,
stockbroking agents, dealers, investment advisers and fund
managers and payment of transaction and investor compensation
fees relating to stockbrokers and dealers as set out in these
Regulations, where applicable.

Financial 44. (1) The level of paid-up share capital shall not fall below
requirements.
two hundred and fifty million shillings at any time during the licence
L.N 99/2009 period and in addition, shareholder’s funds (paid up share capital
and Reserves) shall at no time fall below two hundred and fifty
L.N. 88/2012
million shillings:

Provided that any investment bank whose paid-up

share capital is below the required amount at the time
of commencement of this paragraph shall comply by
the 31st December 2010.

(2) The minimum paid up share capital shall always be

unimpaired and shall not be advanced to the directors or associates
of the investment bank.

(3).
Deleted by LN
112/2013
(4) An investment bank shall maintain a liquid capital of
thirty million or eight per cent of its total liabilities, whichever is

53
LN 112/2013 higher.

(5)

Deleted by LN
112/2013

PART VI- AUTHORIZED SECURITIES DEALERS

Application for 45. (1) An application for a licence to operate as an authorized

license.
securities dealer shall be submitted to the Authority in Form 1 set
out in the First Schedule.

(2) An applicant shall be-

Cap 488 (a) a bank licensed under the Banking Act;
(b) an investment bank or a fund manager;
Cap 487
(c) an insurance company licensed under the Insurance
LN 112/2013 Act; or
(d) any other person who meets the requirements of this
Part and approved by the Authority,
and who shall demonstrate effective capacity and expertise in
dealing in securities.

Inserted by LN (3) An applicant under paragraph (2) shall demonstrate

112/2013
effective capacity and expertise in dealing in securities.

(4) An authorized securities dealer who intends to be

LN 112/2013
admitted as a trading participant at a securities exchange shall
submit a letter from the securities exchange, which the applicant is
seeking admission to as a trading participant, confirming that
applicant shall be admitted into the securities exchange upon
securing a license from the Authority.

Specific 46. The application under regulation 45 shall be submitted

requirements for
approval. together with -

(a) the certificate of incorporation;

(b) the memorandum and articles of association;

Inserted by LN
112/2013
(c) evidence of the minimum paid up share capital
prescribed by the Authority;

54
Inserted by LN (d) evidence of the minimum financial resources and
112/2013 financial capability prescribed by the Authority;

(e) a statement of the un-audited accounts for the

period of the accounting year ending not earlier
than six months prior to the date of application
and the applicant’s audited accounts for the
preceding two years (where applicable);

(f) a business plan containing the particulars on:

(i) management and shareholding

structure of the applicant;

(ii) directors, including their

qualifications, addresses and details of
other directorships;
Deleted by LN (iii))
112/2013

(iv) qualifications, experience and

expertise of the chief dealer which
must be relevant to effectively manage
or operate the business of dealing in
fixed income securities;

(v) the proposed operating system

including dealing infrastructure
suitably located and equipped to
effectively carry out its operations.

(e) the fees prescribed in the Second Schedule.

Deleted by LN 47.
112/2013

L.N 112/2013 48. (1) An authorized securities dealer shall be-

Functions and (a) restricted to dealing in fixed income securities whether listed
membership on a on an approved exchange or not;
securities
exchange.
(b) entitled to trade on behalf of others as well as on their own
account in such segment; and

(c) required to implement necessary operational, trading and

settlement procedures and systems necessary to minimize

55
 settlement and counter party risk and manage conflicts of
interest.

L.N 88/2012 (2) A person licensed by the Authority as an authorized

securities dealer shall be eligible to apply to be admitted as a trading
participant with a securities exchange:

Provided that the authorized securities dealer meets the

eligibility requirements of the admitting securities
exchange.

(3) An authorized securities dealer shall comply with the

provisions on client accounts, conduct of business, prohibited
dealings and associations and investment requirements and
appointment of custodian relating to stockbrokers, stockbroking
agents, dealers, investment advisers and fund managers and payment
Inserted by L.N of transaction and investor compensation fees relating to
112/2013 stockbrokers and dealers as set out in these Regulations, where
applicable.

L.N 112/2013 49. In addition to the requirements specified under regulation

Records of 48(3) every authorized securities dealer shall maintain a record of its
transactions. daily dealing transactions which shall include particulars on-

(a) type of security;

(b) value of trade;

(c) counter party; and

(d) nature of account.

Report of dealing 50. (1) Every authorised securities dealer shall, in respect of all
transactions
its transactions in securities, whether or not such securities are
L.N 112/2013 traded on an approved exchange, submit to the Authority-

(a) monthly reports and accounts within fifteen days of the end
of each calendar month;
(b) quarterly reports and accounts within fifteen days of the end
of each calendar quarter;
(c) half yearly reports and accounts within thirty days of the end
of each half year;
(d) audited annual accounts within three months following the
end of the authorized securities dealer financial year; and

56
 (d) a financial statement complying with the disclosures
prescribed under the Fourth Schedule of these Regulations.

(2) The Authority may require such other form of financial

statement as it may from time to time specify.

(3) The reports referred to in paragraph (1) shall include particulars

on the—

(a) type of securities;

(b) total value of securities traded in terms of sales and
purchases during the relevant period; and
(c) average yield of the total value of securities traded during the
relevant period.

PART VII – GENERAL REQUIREMENTS FOR LICENSING

Renewal of 51. (1) An application for the renewal of a licence shall be

licence.
submitted to the Authority in Form 1 set out in the First Schedule by
the 30th of November of each year.
L.N 99/2009.
(2) The application under paragraph (1) shall be submitted
together with -
(a) the fees set out in the Second Schedule;

(b) where the application is for the renewal of a

licence, management accounts for the period
upto 30th November of each year not later
than 15th December in the same year.

(3) Authorised securities dealers shall submit the annual

accounts and report the dealings operations as may be required by
the Authority.

(4) The audited accounts for each year shall be submitted to the
st
Authority not later than the 31 day of March.

(4A) The financial year of every licensed person shall be the

period of twelve months ending on the 31st December in each year:

Provided that where the financial year of a licensed

person is different from that prescribed in this
paragraph at the commencement of this paragraph,

57
 the licensed person shall comply therewith within
twelve months of such commencement.

Financial 51A. (1) All financial statements prepared by licensees shall be

Statements
prepared in accordance with International Financial Reporting
L.N 99/2009. Standards.

(2) Collective investment schemes, stockbrokers, dealers, fund

managers and investment banks shall publish in at least two daily
newspapers of national circulation-

(a) half-year unaudited financial statements within

two months after the end of the first half of the
financial year; and

(b) full-year audited financial statements within

three months after the end of the financial year.

Professional 51B. (1) Stockbrokers and Investment Banks shall obtain

indemnity
Insurance. professional indemnity insurance to secure an amount not less than
five times their daily average turnover.
L.N 99/2009.

For purposes of paragraph (1), the daily average

turnover shall be calculated based on the firm’s
turnover for the previous year, where applicable,
or such amount as the Authority may determine.

(1) Fund Managers shall obtain professional indemnity insurance to

secure such amount as the Authority may determine based on the
portfolio under the management of the Fund Manager.

Display of audited 51C. “Every licensed stockbroker, fund manager and

balance sheet.
investment bank shall display throughout the year in a conspicuous
L.N. 99/2009 position in every office and branch in Kenya copies of its last
audited balance sheet and profit and loss statement which shall be in
conformity with the minimum financial disclosures requirements
prescribed from time to time by the Authority, and shall include a
copy of the auditor’s report together with full and correct names of
all persons who are directors of the licensee.

58
Determination of 52. In determining whether a person is fit and proper to hold
suitability.
any
particular position, regard shall be had to -

(a) his probity, competence and

soundness of judgment in fulfilling the
responsibilities of that position;

(b) the diligence with which he is

fulfilling or likely to fulfill those
responsibilities;

(c) whether the interests of customers, are

or are likely to be in any way
threatened by his holding that
position, by virtue of past convictions
or offences, involvement in
irregularities, misappropriation of
funds or manipulation of securities
markets transactions.

Insertion of (d),
(d) has contravened the provision of any
(e), (f) & (g) by law designed for the protection of
L.N 99/2007 members of the public against
Commencement
financial loss due to dishonesty or
date January 1, incompetence of, or malpractice by,
2008. persons engaged in transacting with
marketable securities;

(e) was a director of a brokerage firm

that has been liquidated or in under
liquidation or statutory management;

(f) has taken part in any business practice

that, in the opinion of the Authority,
was fraudulent, prejudicial or
otherwise improper (whether unlawful
or not) or which otherwise discredited
his methods of conducting business;

(g) has taken part or been associated with

any other business practice as would,
or has otherwise conducted himself in
such manner as to, cast doubt on his
competence and soundness of
judgment.

59
L.N 99/2009 (h) Whether he has been convicted of an
No. 3 of 2003 economic crime under the Anti-
Corruption and Economic Crimes Act.

Key Personnel of 53. (1) All trading participants of a securities exchange shall
full and associate
members. register with the Authority all key personnel annually including any
changes thereto.

(2) For the purposes of this regulation “key personnel”

includes employees and directors of a trading participant who
have direct dealings with clients and carry on trading activities on
L.N 88/2012 behalf of clients.

Designation of 53A. Every licensed person shall, in writing, designate a

compliance officer.
compliance officer to coordinate all compliance matters with the
L.N 99/2009. Authority.
Change of 53B. (1) Any person licensed by the Authority shall not change
shareholders,
directors, etc its shareholders, directors, chief executive or key personnel except
with the prior confirmation, in writing, by the Authority that it has
L.N 99/2009
no objection to the proposed change and subject to compliance with
any conditions imposed by the Authority.

(2) Where any person proposed to be appointed under

paragraph (1) is found to be a former employee or otherwise
connected with another licensee of the Authority, details of the
reasons for their departure shall be forwarded in support of any
request for no objection.

(2) Every licensee shall lodge with the Authority in every year
and update the same within five days of any change thereto, a list of
all key personnel working with the licensee which shall include the
individual’s full name, national identity card number, job
designation and description of responsibilities and, where they have
worked with other licensees of the Authority, details of their former
employers.

Branch or new 53C. (1) A licensed person shall not open a branch or a new place
place of business.
of business in Kenya, or change the location of a branch or existing
L.N 99/2009. place of business, without the approval of the Authority.

(2) A licensed person shall not close any of its places of

business in Kenya without first giving the Authority a three months’

60
 written notice of its intention to do so or such shorter period of
notice as the Authority may allow.

Alteration of 54. Every licensed person shall submit to the Authority any
memorandum or
articles of alterations to its memorandum or articles of association within
association. thirty days of passing the resolution approving such alteration.

Change to capital 54A. Every licensed person shall notify the Authority of any
structure.
changes to its capital structure within five working days from the
L.N 99/2009. date of the change.

Qualifications of 55. No licensed person shall engage as Secretary a person who is

Secretary.
not qualified under the Institute of Certified Public Secretaries of
Cap. 534 Kenya Act.
Auditor. 55A (1) A licensed or approved person shall not appoint or
L.N 99/2009. remove its auditor except with the prior written approval of the
Authority at least one month prior to such appointment or removal.

(2) If the auditor of a licensed or approved person, in the

course of the performance of his duties under the Act, is satisfied
that-

(a) There has been a serious breach of or non-

compliance with the provisions of the Act or the
Regulations, made thereunder, guidelines or
other stipulations of the Authority; or

(b) A criminal offence involving fraud or other

dishonesty has been committed by the licensed
person or any of its key officers or employees; or

(c) Serious irregularities have occurred which may

jeopardize the security of investors or creditors
of the licensed person; or

(d) He is unable to confirm that the claims of

investors and creditors of the licensed person are
capable of being met out of the assets of the
licensed person,

61
 he shall immediately report the matter to the Authority.

(3) where an auditor of a licensed or approved person fails to

comply with the requirements of paragraph (2) above, the Authority
shall disqualify him from appointment as an auditor of its licensees
and approved persons.

(4) A duty to which an auditor of a licensed or approved person

may be subject to shall not be regarded as contravened by reason of
his communicating in good faith to the Authority, whether or not in
response to a request made by it or any information or opinion on a
matter to which this regulation applies and which is relevant to any
function of the Authority under this Act or Regulations made
thereunder.

(5) This regulation shall apply to any matter of which an auditor

becomes aware in his capacity as an auditor or in discharge of his
duties under these Regulations and which relates to the business or
affairs of the licensed or approved person or any associated persons.

(6) A person appointed as an auditor shall serve for a maximum

period of four (4) consecutive years.

(7) The Authority may arrange trilateral meetings with a licensed

person and its auditor from time to time discuss matters relevant to
the Authority’s supervisory responsibilities including relevant
aspects of the licensed person’s business, its accounting and control
system and its annual accounts.

Notice to the 55B. (1) An auditor of a licensed or approved person shall

Authority by the
Auditor. forthwith give written notice to the Authority where he-
L.N 99/2009
(a) resigns from office;

(b) does not seek to be appointed; or

(c) includes in his report or draft report on the

licensed or approved person’s accounts any
qualification which did not appear in the
accounts for the preceding financial year.

62
Marketing 56. No person shall market securities in Kenya, whether the
securities.
securities have been issued in Kenya or not, through advertisement,
solicitation, invitation or by other means in whatever form or
manner with an aim of reaching the general public or a section
thereof unless such a person is licenced under these Regulations.

PART VIII - TRANSACTIONS OF LISTED

SECURITIES OUTSIDE A SECURITIES EXCHANGE

Nature of 57. An application to the Authority for approval of a private

transaction.
transaction shall be considered if the transaction is for the -

(a) transfer to a close relation in

the form of a gift;

(b) settlement of a will or estate

of a deceased person;

(c) restructuring, mergers or

acquisitions in a scheme which
has been approved by the
Authority; or

(d) transfer of an exceptional

nature of a listed security that
the Authority considers to be
proper and acceptable with
respect to a strategic investor
and serves the investor or
public interest.

(e) transfer not resulting in any

Inserted by L.N change in beneficial ownership
112/2013
otherwise than for purposes of
regulation 57(c), (d) or section
31(1A)(ii) of the Act.

Brokerage 58. Where a private transaction is authorized, no brokerage

Commission.
commission shall be payable on the transaction, except a fee
prescribed by the Authority.
Inserted by L.N
112/2013 Provided that a private transfer under regulation 57(a)
shall be subject to the prevailing prescribed brokerage commission

63
Application for 59. (1) Where it is intended to effect a private transaction of a
approval of a
private transfer listed security under regulation 57 (a), (b) and (e), a stockbroker
representing the proposed transferee shall assess, endorse and
L.N 112/2013 . submit a written application with the required information and
supporting documents—

(a) in the case of certificated securities, to

the securities exchange where the
security is listed, and

(b) in the case of immobilized securities,

to the central depository at which the
security is immobilized,

stating reasons why the proposed transaction is eligible to be

transferred in a private transaction.

(2) Where an application is made under regulation 57(a) or (b), the

securities exchange or a central depository, as the case maybe, shall
notify the stockbroker within seven days of receiving the application
whether the securities exchange or the central depository objects to
the private transaction or not, after examining and satisfying itself
that the proposed transfer is eligible for consideration as a private
transaction in accordance with these Regulations.

(3) The securities exchange or a central depository, as the case

maybe, shall, upon determination of any application made under
regulation 57(a) or (b), approve and simultaneously notify the
Authority that the application complies with regulation 57 (a) or (b).

(4) The securities exchange or the central depository shall, upon

receipt of an application made under regulation 57(e), forward the
application together with its recommendations to the Authority for
approval.

(5) The securities exchange and the central depository shall jointly
submit to the Authority, guidelines for approval in respect of the
processing requirements of a private transfer under regulation 57(a)
and (b).

(6) The guidelines stipulated under subparagraph (5) shall apply to

all stockbrokers.

64
Approval fee. 60. The approval fee for any transaction of a listed securities
outside a securities exchange shall be at the rate prescribed by the
Authority.

Private 61. (1) With respect to an application for approval of a

transactions.
private transaction, falling under regulation 57 (c) or (d) or section
31 (1A) (ii) of the Act, the applicant shall submit to the Authority
for approval a detailed draft information memorandum or a circular
to be distributed to the shareholders containing information on -

(a) the name and address of the applicant;

(b) the date of incorporation;

(c) the particulars of core activities, directors,

management and major shareholders;

(d) the details of any agreements entered or proposed

to be entered into and the cost;

(e) a statement by the financial adviser managing the

transaction that to the best of its knowledge and
belief the application constitutes full and true
disclosure of all material facts about the offer and
issuer and where appropriate it has satisfied itself
that the profit forecasts have been stated by the
directors after due and careful inquiry;

(f) the details of any proposed merger, takeover,

acquisitions, share swap, reorganization or
restructure scheme and the relevant shareholders
and/ or board resolutions;

(g) a declaration by the directors of the applicant in

the following form:

“This application has been approved by the

directors of the company all of whom jointly and
severally accept responsibility for the accuracy
of the information given and confirm that after
making all reasonable inquiries and to the best of
their knowledge and belief, there are no facts the
omission of which would make any statement
herein misleading”.

65
 (h) any other matters as may be requested by the
Authority.

(2) The applicant shall make a public announcement of its

intention to apply to the Authority for approval of the proposed
transfer and reasons therein and a copy of the transfer form for the
proposed transaction shall be submitted to the Authority together
with the application.

PART IX- DESSMINATION OF INFORMATION TO THE

PUBLIC AND SHAREHOLDERS
Disqualification of 62. The Authority may -
professionals.
(a) disqualify any person from
giving professional opinion on
matters related to listed
securities, public offer or issue
of securities; or

(b) otherwise penalize any

professional who in the
opinion of the Authority has
given a professional opinion
that is false or misleading or
has omitted to give an opinion
where such omission is likely
to be misleading in the
circumstances in which the
professional opinion is given
or omitted as the case may be.

Content of public 63. (1) All circulars to shareholders and the public including
communication
and circular to advertisements, offer documents and any other communication by
shareholders. listed companies, professionals and persons licensed under the Act
shall be factual and statements made shall be for the purpose of-

(a) assisting in the evaluation of a particular security,

or type of securities;

(b) promoting the industry, the service offered or the

desirability of investing in securities in general; or

(c) providing shareholders or the public with accurate

and adequate information about the listed company
or securities transaction and market activity.

66
 (2) No material fact or qualification may be omitted if such
omission would cause a shareholders’ circular, advertisement or
offer document to be misleading in the context of other information
presented to the shareholders, investors or the general public.

(3) In making a recommendation with respect to any security

a licensed person, issuer or analyst shall:-

(a) disclose the price at the time of

the recommendation and, if
applicable, the fact that such
licenced person or analyst
makes a market in the
securities recommended
(where applicable);

(b) recommend a buy or sell action

and shall disclose the basic
facts and assumptions in
support of such
recommendation and whether
the licenced person or analyst
or person associated to it owns
more than a nominal amount of
such securities.

(c) highlight all risk factors that

such licenced person or analyst
has taken into consideration in
the recommendation; and

(d) state the source of the facts and

the recommended time frame
for the validity of assumptions.

(4) Any offer of a report, analysis including their updates or

other service without any charge must be provided as such without
any condition or obligation other than what is clearly described in
the offer.

(5) No claim with respect to research or analysis, capacity or

expertise under which the facilities are available, may be made
beyond those in actual possession of the person making the claim.

(6) All statements made in a circular to shareholders and an

67
 advertisement directed to the general public shall be supported by
facts the source of which shall be disclosed therein.

(7) All circulars, advertisements or offer of securities to

shareholders of listed companies shall be submitted to the Authority
for approval prior to distribution, provided that the Authority may
require the inclusion of such additional information which in its
opinion is relevant to the shareholders or investors.

(8) For the purposes of this regulation -

(a) “analyst” includes business,

economic, financial or any other
analyst by whatever name who
analyses and expresses opinions or
recommendations about securities or
public listed companies;

(b) “nominal” in relation to a security

means a value of ten thousand
shillings or less.

PARTX- INVESTOR COMPENSATION FUND

Contribution by 64. (1) Every buying or selling stockbroker or dealer that is a

licencees.
trading participant of a securities exchange shall contribute to the
L.N 88/2012 Compensation Fund such amount as shall be prescribed from time to
time by the Authority.

(2) All monies contributed to the Compensation Fund shall

be credited to a bank account established by the Authority for that
purpose.

Management and 65. (1) The Compensation Fund shall be managed by the
audit of the
compensation Authority as a separate fund and disclosed as such in the Authority’s
fund. annual balance sheet as an asset and liability.

(2) The Authority shall keep proper accounts and records

of the Compensation Fund and in every financial year, prepare a
statement of accounts showing the movement and financial position
of the Fund in the Authority’s annual report.

(3) The accounts referred to in paragraph (2) shall

include the income and all sources of contribution to and expenses
or disbursements of the Compensation Fund including the fees
charged by the Authority for the management of the Fund and any

68
 investments of the Fund.

(4) The accounts and records of the Compensation Fund

shall be audited by the auditor appointed by the Authority for the
Authority’s annual accounts.

Trustees of the 66. Members of the Authority shall act as the trustees of the
Compensation
Fund. Compensation Fund and may appoint a committee of the Board to
oversee its management.

Meetings of the 67. A special meeting of the members of the Authority shall be
Compensation
Fund. convened by the Chief Executive of the Authority whenever the
business of the Compensation Fund so requires and the Board of the
Authority shall determine the procedure for such meetings.

Report to the 68. The Authority shall include information relating to the
Minister.
Compensation Fund in its annual report to the Minister for the time
being responsible for Finance.

Compensation of 69. Whenever an investor has suffered pecuniary loss due to the
investors.
failure of a stockbroker, dealer or on investment bank carrying out
stockbroking business or dealing operations, to meet its contractual
obligations, which loss has not been compensated -

(a) from the bank guarantee or securities

furnished by such licensed person to
L.N 88/2012
the securities exchange or central
depository as the case may be of
which such licensed person is a
trading participant; or

(b) from the Compensation Fund of the

securities exchange of which such
licensed person is a trading
participant; or

(c) from any payment made by a statutory

manager appointed under section 33 A
(2) (a) of the Act;

(hereinafter referred to as “the net loss”) the investor

shall apply to the Authority for compensation from
the Compensation Fund in cash or securities equal to
the net loss.

69
Maximum 70. (1) The net loss to an investor shall be subject to a maximum
compensation.
of fifty thousand shillings.

(2) The statutory manager shall recommend to the Authority

the net loss that the investor may claim from the Compensation
Fund.

Investor 71. (1) The Authority shall establish an Investor Compensation

Compensation
Committee. Committee.

(2) The Compensation Committee shall include the Chairman

and the Chief Executive of the Nairobi Stock Exchange and any
other persons who may be appointed by the Authority to be
members of that Committee.

(3) The Compensation Committee shall, after examination of

the evidence produced in support of a claim, make any
recommendation to the Authority with respect to whether allow the
claim, an assessment of the amount payable including any pro rata
allocation of any such limit prescribed for every defaulting
stockbroker or dealer or the size of the fraud, as applicable.

(4) While determining the amount to be paid in compensation

to an investor, the Compensation Committee shall take into account
the total amount available in the Compensation Fund.

(5) The Authority shall give notice of its decision to the

investors in writing or by other means of appropriate notification.

Notification of
72. (1) Every investor who has suffered a pecuniary loss shall
pecuniary loss. notify the statutory manager of the licensed person liable for the loss
within sixty days of the appointment of the statutory manager.

(2) The statutory manager shall pay all valid claims within six
months of its appointment.

Submission of 73. (1) The statutory manager shall submit to the Authority a
claims.
list of investors to be compensated as well as the supporting
documents.

(2) The Authority shall convene a meeting of the

Compensation Committee within twenty-one days of receipt of
submission of a claim by the statutory manager.

70
Payment of claims. 74. (1) Where payment has been made out of the Compensation
Fund on behalf of a licensed person, such licensed person shall be
liable to the Compensation Fund for an amount equal to the payment
made out of the Fund.

(2) In the event of liquidation of a licensed person, the

liquidator shall pay the Compensation Fund any money paid by the
Fund to investors on behalf of the insolvent person under these
Regulations to the extent of such payment.

PART XI - DISCLOSURE OF INFORMATION

Disclosure of 75.(1) Where any person-

interest in shares.

(a) by his knowledge acquires a notifiable interest in

shares in a listed company’s share capital, or ceases
to be interested in such shares; or

(b) becomes aware that he has acquired a notifiable

interest in the relevant shares of a listed company or
that he has ceased to be interested in such shares in
which he was previously interested;

such person is under an obligation to notify the listed company of

the interest which he has, or had in its shares.

(2) Every listed company shall make a monthly report to the

securities exchange giving particulars of-

(a) all persons from which the listed company has

received a notification under paragraph (1);

(b) all directors holding one percent or more in the

relevant share capital;

(c) cumulative holding of the relevant share capital

by directors.

(3) A person is taken to be interested in shares:

(a) if he is an employee of the listed company;

(b) if he is a director or chairman of the listed

company;

(c) in which his spouse, any infant child or step child

71
 of his is interested; or

(d) if a body corporate is interested in them and-

(i) the body corporate or its directors

are accustomed to act in
accordance with his directions or
instructions; or

(ii) the person is entitled to exercise or

control the exercise of one third or
more of the voting power at
general meetings of the body
corporate; or

(iii)the person is a director or a

shareholder of the body corporate.

(4) The existence of the obligation in a particular case depends -

(a) on circumstances obtaining

before and after whatever is in
that case the relevant time; and

(b) in a case within paragraph (1)

(b), the time at which the
person became aware of the
facts in question.

(5) In this regulation -

(a) a “director” means a director
of a listed company;

(b) “relevant share capital” means

the company’s issued share
capital of a class carrying
rights to vote in all
circumstances at general
meetings of the company; and

(c) a “notifiable interest” means

three percent or more of the
relevant share capital of a
listed company.

72
Furnishing of 76. (1) Every person notified by the Authority pursuant to
information to the
Authority. section 13 of the Act shall provide any specified information in the
form and content as required by the Authority, with regards to the
information on orders, purchases, sales or trading and settlement of
securities including documentation relating to such transactions and
disclosure of beneficial ownership of securities and such
information may be shared with other regulatory agencies for the
sole purpose of ensuring compliance, enforcement and any other
matters pursuant to a bilateral or multilateral memorandum of
understanding.

(2) The information sought from any person under

paragraph (1) shall be submitted to the Authority in a written form
within the time specified by the Authority and such information
shall include statements made under oath.

(3) Where information has been submitted to the Authority

under paragraph (2), the Authority may seek to verify such
information and the person in possession of such information and
documentation shall avail it without obstruction to the authorized
personnel of the Authority.

(4) The Authority shall enter into a memorandum of

understanding pursuant to section 11(3) (q) of the Act either on a
bilateral or a multilateral basis with other regulatory organizations or
agencies on a reciprocal basis to facilitate exchange of information
for the purposes of development of the capital markets and for
enforcement and compliance with the laws and regulations of capital
markets applicable in the jurisdictions party to the memorandum of
understanding.

(5) Where the Authority does not have within its jurisdiction
information or documents requested under a bilateral or multilateral
memorandum of understanding the Authority shall seek to
collaborate with other relevant agencies to obtain such information
with a clear understanding with such other agencies that the
information may be shared with other regulatory agencies pursuant
to the memorandum of understanding.

(6) The information obtained under paragraphs (1) and (5)

shall be used by the Authority for regulatory purposes including
enforcement and compliance and sharing with other regulatory
agencies pursuant to the memorandum of understanding.

(7) The Authority may include information obtained under

paragraphs (1) and (5) by the Authority for its internal regulatory

73
 purposes or exchange such information pursuant to section 11(3) of
the Act.

Preservation of 77. Every issuer of securities to the public or a section

finance and other
records. thereof approved by the Authority and every person licensed by the
Authority, shall preserve all financial and other records whether
such records are maintained in an electronic or manual form,
relating to transactions conducted by the licensee or to the offer of
securities by an issuer, including daily, weekly, monthly, quarterly
and annual transactions and other relevant records including minutes
of all meetings on account of such transactions and registers of
securities, for a period of seven years.

Destruction of 78. No person shall at any time within the prescribed period
financial or other
records. interfere, deface or destroy the records referred to in regulation 77,
in any manner that will lead to the alteration of any facts or content
therein including the date, amount and names of all persons party to
the transactions whether such person is a licensee of the Authority,
an issuer of securities to the public or a section thereof, an auditor of
such licensee or issuer or any professional who is or will be
involved directly or indirectly in the transactions.

PART XII – MISCELLANEOUS PROVISIONS

Deleted by LN 79.
99/2007

Prevention of 80. (1) Every licensed person shall obtain through a client
money laundering
and other illicit information questionnaire details from a client or a potential
activities. client with respect to the following –

(a) the identity of the client or a potential

supported by documentary evidence;

(b) nature of business activities of the

client or potential client;

(c) origin and sources of funds used or to

be used for investment in securities.
Where the money or funds originate
from outside Kenya a confirmation
from the remitting entity of the nature
of its business and of the source of the
moneys or funds;

74
 (d) a written declaration by the client or
potential client confirming -

(i) the accuracy of all information

given under paragraphs (a) to
(c); and

(ii) that the moneys or funds used

for the investment in securities
is not arising out of the
proceeds of any money
laundering or other illicit
activities.

(e) a licensed person shall maintain at

L.N. 99/2009 least the following information in
respect of their clients and shall
ensure that they can link each
transaction to the beneficial owner:

(i) where the client is a natural

person, any person on
whose behalf the client is
acting, whether as
nominee, trustee or any
other capacity;

(ii) where the client is a limited

partnership, the name of
the general partner (and
where the general partner
is a body corporate, the
information as prescribed
under sub-regulation (iv)
shall be maintained);

(iii)where the client is an

unlimited partnership, the
names of the other
partners;

(iv) where the client is a body

corporate, the names of all
individuals who have direct
or indirect interest
amounting to thirty per

75
 cent or more of the equity;

(v) where the client is a trust,

the name of the settlers,
trustees, protectors and
principal named
beneficiaries;

(vi) where the client is a legal

arrangement other than a
trust, the name of the
owner or the controller.

(f) where the customer is a financial

institution, such as a bank, insurance
company, pension fund or collective
investment fund and is conducting
business collectively on behalf of a
large number of underlying
customers, and where the institution
is subject to rules or regulations that
require the financial institution to
conduct customer due diligence, the
licensee is permitted to rely on the
financial institution to hold beneficial
ownership information and need not
hold that information itself.

(2) The client information under paragraph (1) shall be

obtained by the licensed person every time a client places an
investment order with the licensed person.

(3) The client information obtained under paragraphs (1) and

(2) shall be maintained by the licensed person as part of the records
required under regulations 19, 31, 43 and 49.

L.N. 99/2009 (3A) The licensed person shall make such information
available to the Authority on request and also to the central
depository for the purpose of answering an enquiry made of it under
No. 4 of 2000. Section 58 of the Central Depositories Act.

76
L.N No 429 of 81. The Capital Markets Authority Rules 1992 are amended by
1992
deleting Parts II, III, IV, V, VI, VII, VIII, IX, X and XIII.

L.N 232 of 1994. 82. The Capital Markets Authority (Amendment) Rules 1994
are revoked.

L.N. 428 of 1992. 83. The Capital Markets Regulations are revoked.

FIRST SCHEDULE
THE CAPITAL MARKETS ACT

77
 (Cap. 485A)

Form 1 (r.3, 14, 28, 39, 45 & 51)

THE CAPITAL MARKETS (LICENCING REQUIREMENTS) (GENERAL)

REGULATIONS, 2002

APPLICATION FOR A LICENCE/ RENEWAL OF LICENCE TO CONDUCT THE

BUSINESS OF A SECURITIES EXCHANGE, STOCKBROKER, DEALER,
INVESTMENT ADVISER, FUND MANAGER, INVESTMENT BANK OR
AUTHORISED SECURITIES DEALER

Application is made for a securities exchange/stockbroker/ dealer/ investment adviser/ fund

manager /investment bank/authorized securities dealer (tick as appropriate) licence/renewal of
licence (delete where inapplicable) under the Act and the following statements are made in
respect thereof:

Note-
If space is insufficient to provide details, please attach annexure(s). Any annexure(s) should be
identified as such and signed by the signatory of this application.

Information provided should be as at the date of the application or renewal.

1. Name of company ..................................................................... Limited

2. Registered office .................................................................................
3. Date of incorporation ...........................................................................
4. Address ...............................................................................…..........
5. E-mail ………………………………………..
6. Location, address and telephone number of principal office……………………….
......................................………………..……………………………………………….

416
7. Location, address and telephone number of branch offices ……………………...
………………………………………………………………………………………….
8. Details of capital structure:
(a) Nominal capital (Kshs.) ……………………………………
(b) Number of shares …………………………………………..
(c) Paid-up capital (Kshs) ……………………………………..
9. Shareholders (or investors in the case of a securities exchange) (please attach a list)
Name Address & telephone number Number of shares held

10(a) Directors (please attach a list)

78
 Name Identity Date of Date Permanent Academic or Number of
card / appointment of address & professional shares held
Passport birth telephone qualification in the
number number company

(b) Secretary
Name………………………………………………………………………………….
Address ………………………………………………………………………………
Institute of Certified Secretaries of Kenya Registration No. …………………………
(c) Chief executive and other key personnel
Name Identity Date of Date Permanent Academic or Number of
card / appointment of address & professional shares held
Passport birth telephone qualification in the
number number company

11. Particulars of other directorship(s) of the directors and secretary.

…………………………………………………………………………………………
12. Particulars of shares held by directors or secretary in other companies
…………………………………………………………………………………………
13. Has the applicant or any of its directors, secretary or members of senior management at any
time been placed under receivership, declared bankrupt, or compounded with or made an
assignment for the benefit of his creditors, in Kenya or elsewhere? Yes/ No. If ‘yes’, give
details
……………….………………………………………………………………….
14. Has any director, secretary or senior management of the applicant been a director of a
company that has been:
(a) denied any licence or approval under the Capital Markets Act or equivalent legislation
in any other jurisdiction: Yes/No.
If Yes, give details.
…………………………………………………………………………………..
(b) a director of a company providing banking, insurance, financial or investment
advisory services whose licence has been revoked by the appropriate authority?
Yes/No. If Yes, give details.
…………………………………………………………………………………..
(c) subjected to any form of disciplinary action by any professional body of which the
applicant or any of its director was a member? Yes/ No. If yes, give details.
…………………………………………………………………………………..
15. Has any court ever found that the applicant, or a person associated with the applicant was
involved in a violation of the Capital Markets Act or

Regulations thereunder, or equivalent law outside Kenya? Yes / No. If ‘yes’, give details.
……………………………………………………………………………………

79
16. Is the applicant and/or a person associated with the applicant now the subject of any
proceeding that could result in a ‘yes’ answer to the above question (15)? Yes/ No. If
‘yes,’, give details.

…………………………………………………………………………………..
17(1) Is the applicant, or any shareholder, director or the secretary of the applicant, a member or
director of a member company of any securities exchange? Yes/ No. If ‘yes’, give details.
……………………………………………………………………………………
(2) Have any of the above persons been -
(a) refused admission as a trading participant of any securities organization? Yes / No. If
‘yes’, give details
……………………………………………………………………………………
(b) expelled from or suspended from trading on any securities organization? Yes/No. If
‘yes’ give details
……………………………………………………………………………………
(c ) subjected to any other form of disciplinary action by any stock exchange? Yes/No. If
‘yes’, give details.
……………………………………………………………………………………
18. Business references:
Name Address Telephone number(s) Occupation

19. Profile of the chief executive and key employees in the applicant company:
Name Post Qualifications Experience

20. List the office facilities of the applicant

…………………………………………………………………………………..
21. State the exact nature of the activity to be carried on which obliges the applicant to apply for
a licence from the Capital Markets Authority.
…………………………………………………………………………………..
22. State securities exchange at which the applicant intends to seek admission as a trading
participant
…………………………………………………………………………………
23. Any other additional information considered relevant to this application:
…………………………………………………………………………………..
We …………………………………(Director), …………………………… (Director)
and ………………………………. (Secretary) declare that all the information given
in this application and in the attached documents is true and correct.
Dated this …………………… day of ……………………. 20 …..
Signed:
……………………………………….… ) Director

………………………………………….) Director
…………………………………………) Secretary

80
Note:
1. The following shall be submitted with the application for a licence:
a) memorandum and articles of association.
b) certificate of incorporation
c) business plan complying with the requirements of regulation 15 (1)(d) (stockbroker &
dealer), regulation 29(1)(d) (Investment adviser and fund manager), regulation
39(2)(d) (investment banks) regulation 46(d)(authorized securities dealers) of the
Capital Markets Authority (Licensing Requirements) (General) Regulations.
d) a statement of the un-audited accounts for the period of accounting year ending not
earlier than six months prior to the date of application and audited annual accounts for
the preceding two years (in the case of application of licence), management accounts
th
upto the 30 November and audited annual accounts for the preceding year (in the
case of renewal of licence);
e) a declaration by the directors as to whether after due enquiry by them in relation to the
interval between the date to which the last accounts have been made and a date not
earlier than fourteen days before the date of the application –
(i) the business of the company has, in their opinion, been satisfactorily
maintained;
(ii) there have, in their opinion, arisen any circumstances adversely affecting
the company’s trading or value of its assets;
(iii)there are any contingent liabilities by reason of any guarantees given by
the company or any of its subsidiaries;
(iv) there are, since the last annual accounts, any changes in published reserves
or any unusual factors affecting the profit of the company or any of its
subsidiaries.

f) a copy of the bank guarantee to be lodged with the securities exchange or the central
depository (where applicable).
g) a declaration by persons authorized as prescribed to accompany the application form;

h) an application fee of Kshs. 2,500

81
 SECOND SCHEDULE (r.3(2), 14, 29 (1), 46, 51)
THE CAPITAL MARKETS AUTHORITY FEES STRUCTURE
AS APPROVED BY THE MINISTER FOR FINANCE PURSUANT TO SECTION
36(1)(a) OF THE CAPITAL MARKETS ACT.

PART 1 – APPROVAL AND ANNUAL FEE

(s11) (3)(d)(ii), 23(3) Act)

(a) Securities Exchange annual fee 1% of the gross earnings
Section 20(7) Capital Markets Act payable, excluding the
transaction fees
(b) Credit Rating Agency - approval fee 200,000
(c) Central Depository Systems - approval and annual fee 200,000
Amended by LN(d) Registered venture -approval fee 250,000
32/2008 Capital Company”
(e) Fund of a registered -approval and 250,000
Venture capital annual fee (subject to
Company (payable per a maximum
fund) annual fee
of Kshs.
500,000

payable by
anyregistered
venture capital company)

(f) Collective Investment Schemes - approval and annual fee 150,000

Section 30(3)(c) Capital Markets Act

PART II - LICENCE AND RENEWAL FEES

(s. 11(3)(d)(ii) of the Act)
(a) Stockbroker or Dealer 100,000
(b) Investment Adviser 100,000
(c) Fund Manager 100,000
(d) Fund Manager registered with Retirement Benefit Authority 50,000
(e) Authorized Depositories 100,000
(f) Authorized Securities Dealers 200,000
(g) Investment Banks 250,000
(Application fees for approvals, licence or renewal of all licences is Kshs. 2,500)

PART III – OTHER FEES

(s.11(3)(d)(ii) of the Act)
L.N. 99/2009 (a) Issuer of securities to the public or a section of public 0.15%
(percentage of the value of the issue) subject to a maximum fee of

82
 Kshs.30 million.

L.N. 32/2008 (b) Approval of listing by introduction- 0.25 percentage of value of the
issue)” subject to a maximum of
Amended by KShs. 5,000,000.
L.N.35/2016
(c) Issuer of Capitalization or rights issue Kshs 50,000 or
(percentage of the value of the issue) 0.25% which
ever is higher subject to a maximum fee of Kshs.30 million.
(d ) Issuer of commercial paper and corporate
bonds – approval and renewal (percentage of the value of the
issue) 0.1% subject to a maximum of Kshs.30 million.

(dd) Issuer of regional fixed income securities-each East African Partner

Inserted by State regulator approving the issue shall receive an equal share of the
L.N 112/2013
evaluation fee of 0.1% of the value of the offer subject to a maximum of
the local currency equivalent to United States of America dollars 200,000
and a minimum of the local currency equivalent to United States of
America dollars 20,000.
(e) Approval of listing of Government Securities 0.075%
(percentage of the amount raised) subject to a maximum of
Kshs.50 million.

(f) Market Development fees to support investor education and market

infrastructure development:

(i) Amount payable by listed companies to the

Authority 0.01% (percentage of market
Amended by capitalization as at subject to a minimum fee of
L.N.35/2016 November 30 of each year) Kshs 50,000 and a
maximum of Kshs. 100,000 per year

(ii) Amount payable directly to the Authority by

issuers 0.005% with respect to listed fixed
income securities, subject to a minimum fee of
including the Government and corporate
securities Kshs.100,000 per year and a on the
Fixed Income Market Segment maximum of
Kshs 2.5 of a securities exchange million
(percentage of the aggregate value of the listed
securities as at November 30 of each year).

LN 190/2010 (g) Amount payable by each buyer and seller of a listed security –
(i) shares 0.12%.
(ii) fixed income securities 0.0015%.

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LN 190/2010 (h) Amount payable by each buying and selling stockbroker –

(i) shares 0.01%.

(ii) fixed income securities 0.004%.

(percentage of the consideration payable to the investor compensation fund) Section

18 (2)(a) Capital Markets Act

L.N 112/2013 (i) Approval fee payable by the transferee for transactions
of listed securities outside the securities exchange authorized
under Section 31 (1A) (i) and (ii) as follows:-

(i) transfer in settlement of an KSh. 1,500 per application (including an

estate of a deceased person application relating to a portfolio of
or a transfer not resulting in securities), provided that where the total
a change in beneficial value of securities in the application is
ownership otherwise than below KSh. 10,000, no fee shall be payable.
for purposes of (ii) and (iii)
below.

(i) Transfer, arising out of the re-organisation of the share capital of a

listed company, that does not result in a change of beneficial
interest in such share capital. 0.1% (percentage of the nominal
value of the shares)

Inserted by L.N
112/2013 Subject to a maximum of KSh. 100,000

(ii)Any other transfer that results in a change of beneficial interest in

the shares capital of a listed company, including any transfer
under a take-over scheme, merger or acquisition, approved by the
Authority 0.5% (percentage of the market value of the shares)

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 THIRD SCHEDULE
(r.12(7))
DISCLOSURE BY A SECURITIES EXCHANGE IN THE FINANCIAL STATEMENT
The accounts shall be prepared in accordance with the International Accounting Standards
I. The following shall be disclosed in the income statement.
a) Income -
(i) listing fees
(ii) transaction fees
(iii) finance income
(iv) other income
b) Expenditure -
(i) personnel costs including separate disclosure of consolidated pay, pension and gratuity
(ii) staff training
(iii) rent and maintenance
(iv) investor education
(v) directors’ fees
(vi) annual fees payable to Capital Markets Authority
(vii) committee members’ expenses
(viii) audit fees
(ix) depreciation
(x) general administrative expenses
(xi) legal and professional expenses
(xii) others expenditure
2. The following shall be disclosed in the balance sheet
(a) property, plant and equipment
(b) motor vehicles
(c) goodwill
(d) investments
(e) listing fees receivable
(f) deferred tax
(g) members fund
(h) revenue reserves
(i) compensation fund.

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 FOURTH SCHEDULE
(r. 21(1)(d), 32 (1)(d), 43, 51)
DISCLOSURES BY OTHER LICENSEES INCLUDING STOCKBROKERS,
INVESTMENT ADVISERS, FUND MANAGERS, DEALERS AND INVESTMENT
BANKS IN THE FINANCIAL STATEMENT
I. The following shall be disclosed in the income statement where applicable
a) Income
(i) stock brokerage commission
(ii) consultancy income
(iii) dealing income
(iv) advisory income including restructuring, and corporate finance
(v) asset management fees
(vi) underwriting fees
(vii) other services income
(viii) finance income
b) Expenditure
(i) directors’ emoluments
(ii) staff costs
(iii) rent and maintenance
(iv) depreciation
(v) audit fees
(vi) administrative expenses
(vii) finance expenses
2. The following shall be disclosed in the balance sheet
(a) property, plant and equipment
(b) motor vehicles
(c) investments
(d) deposits and prepayments
(e) share capital
(f) revenue reserves
(g) directors’ loans
(h) shareholders loans
(i) amounts due to clients

86
 FIFTH SCHEDULE
BROKERAGE COMMISSION AND FEES
(r. 26)
1. FOR NEW ISSUES
(a) Fees:
(i) Sponsoring stockbrokers: Sponsoring fee as negotiated with the issuer.
(ii) The issuer shall pay a marketing fee not exceeding Kshs 25,000 each to all
stockbrokers subject the stockbroker placing securities of a minimum value of
Kshs 250,000.
(b) Placing Commission:
(i) Stockbrokers: 1.5% of the value of the successful application subject to a minimum of
Kshs 100/=.
(ii) Participating banks (as agents of the issuer): 1% of the value of successful
applications.
2. FOR SECONDARY TRADING , (Amended by Legal .Notice No.35 of 2016)

Consideration Net Transaction Fee Investor Maximum

(Transaction Brokerage Compensation Total
Value) Commission Fund Fee and Cost to
% Central Investor
Depository %
Guarantee Fund
Fee

NSE CMA CDSC% CDSC CMA Investor

% % Guarantee Compensation
Fund % Fund %
Upto Kshs 1.76* 2 0.12 0.08 0.01* 0.01* 2.10
100, 000

Above Kshs Open to 2 0.12 0.08 0.01* 0.01* 1.70

100,000 negotiation
subject to a
maximum
of 1.36%

1. * Stockbrokerage commission is net of contribution by the stockbroker or investment bank of 0.02% to

the CMA Investor Compensation Fund and CDSC Guarantee Fund Fee.

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 2. Stockbrokerage commission shall be limited to Kshs 100 for all odd lots transactions up to Kshs 3,000
excluding statutory fees. Odd lots transactions in excess of Kshs. 3,000 shall be charged a commission at
the prescribed rate of 1.76% excluding statutory fees.

3. FOR DEBT INSTRUMENTS (SECONDARY MARKET) (Amended by Legal Notice No. 190 of
2010), (Amended by Legal Notice No.35 of 2016)

NET Transaction fee

BROKERAGE NSE % CMA % CDSC % ICF % Total %
COMMISSION%
0.024 0.0035 0.0015 0.002 0.004 0.035

*
*Stockbroker commission is net of contribution by the market intermediaries trading in the
secondary market (stock brokers, investment banks and authorized securities dealer) of
0.004% to the investor compensation fund.

4. PRIVATE TRANSFER FEES (Inserted by Legal Notice No. 112 of 2013)

Regulation 57 (a) BROKERS & NSE CDSC

fees levied at 2.1% of INVESTMENT
the value of BANKS.
transaction (being
Certified 55% 45% NIL
prescribed brokerage
Securities
commission) where
transaction value is
below Kshs. 100, 000 Immobilized 55% NIL 45%
(subject to a Securities
maximum of 1.5%)
and shared as
follows-

Regulation 57(b) or Certified 55% 45% NIL

(e) Kshs. 1,500 per Securities
application

88
(including an Immobilized 55% NIL 45%
application relating Securities
to a portfolio of
securities), (provided
that where the total
value of securities in
the application is
below Kshs. 10,000,
no fee shall be
payable) and shared
as follows-
Regulation 57 (c)…… Transfer arising out of the re-organisation of the share capital of a listed
company that does not result in change of beneficial interest in such share capital…………0.1%
(percentage of the nominal value of the shares) and payable to the Authority.

Regulation 57 (c) or (d)……Any other transfer that results in change of beneficial interest in the
shares capital of a listed company, including any transfer under a take-over scheme, merger or
acquisition, approved by the Authority at 0.5% (percentage of the market value of the shares)
and
payable to the Authority

th
Made on the 4 July 2002.

D. D. AFANDE P. K. MELLY
Chairman Chief Executive
Capital Markets Authority. Capital Markets Authority.

89