Capital Markets Act
Capital Markets Act
Capital Markets Act
CHAPTER 485A
CHAPTER 485A
3
CAP. 485A [Rev. 2022]
Capital Markets
4
[Rev. 2022] CAP. 485A
Capital Markets
30M. Trustees
30N. Appointment and liability of securitisation manager
30O. Securitisation arranger
30P. Servicers, alternative servicers and successor servicers
30Q. Classification of issues or offers of asset backed securities
30R. Conversion of restricted or unrestricted offers
30S. Content of the prospectus, offering memorandum or information notice
30T. Secondary sales or transfer of asset backed securities
30U. Obligations applicable to restricted offers
30V. Obligation to conduct due diligence
30W. Rating requirement and obligations of credit rating agencies
30X. General disclosure obligations
30Y. Trustee to file a summary of transferred assets
30Z. Securitisation requirements
PART V – SECURITIES TRANSACTIONS AND REGISTERS
31. Transactions in securities
32. Register of interest in securities
PART VI – INSIDER TRADING AND OTHER MARKET ABUSES
32A. Application
32B. Insider trading
32C. Inside information
32D. Information made public
32E. Penalty for insider trading
32F. Market manipulation
32G. False trading and market rigging
32H. Fraudulently inducing trading in securities
32I. Use of manipulative devices
32J. False or misleading statements inducing securities transactions
32JA. Front-running
32K. Liability to pay damages
32KA. Obtaining gain by fraud
32L. Penalty for insider trading and market abuse
33. Insider trading prohibited
PART VII – MISCELLANEOUS PROVISIONS
33A. Powers of the Authority to intervene in management of a licence
33B. Prohibited conduct to be reported
33C. Remedy for unfair prejudice
33D. Powers of the Authority to demand for production of records and documents
33E. Winding up
34. Other offences
34A. Offences and penalties
34B. Compounding of offences
35. Appeals from action by Authority
5
CAP. 485A [Rev. 2022]
Capital Markets
6
[Rev. 2022] CAP. 485A
Capital Markets
CHAPTER 485A
PART I – PRELIMINARY
1. Short title
This Act may be cited as the Capital Markets Act.
[Act No. 3 of 2000, s. 3.]
2. Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensed person, except
in a derivatives market, to perform any of the functions ordinarily performed by
the licensed person on behalf of that licensed person;
“authorised securities dealer” means a person authorized to deal in
securities and operate in a specific market segment as may be prescribed by
the Authority;
“Authority” means the Capital Markets Authority established by section 5;
“beneficial owner” means a natural person who, whether alone or with
associates, is the ultimate owner or controller of a legal person or arrangement,
or, if there is no legal person or arrangement, the person on whose behalf a
transaction is being conducted;
“Board” means the Board of the Authority constituted under section 5;
“capital market instrument” means any long-term financial instrument
whether in the form of debt or equity developed or traded on a securities
exchange or directly between two or more parties for the purpose of raising
funds for investment;
“collective investment scheme” includes an investment company, a unit
trust, a mutual fund or other scheme whether or not established or organized
in Kenya which—
(a) collects and pools funds from the public or a section of the public
for the purpose of investment;
(b) is managed by or on behalf of the scheme by the promoter of the
scheme;
7
CAP. 485A [Rev. 2022]
Capital Markets
and includes an umbrella scheme whose shares as herein defined are split
into a number of different class schemes or sub-schemes, each of which is
managed by or on behalf of a common promoter, but does not include—
(i) a body corporate incorporated under any law in Kenya
relating to building societies, co-operative societies,
retirement benefit schemes, credit unions or friendly
societies;
(ii) an arrangement where each of the holders of the shares is
a body corporate in the same group as the promoter;
(iii) an arrangement where each of the holders of the share
is a bona fide employee, former employee, wife, husband,
widow, widower, child, stepchild of the employee or former
employee of the directors or shareholders of a body
corporate in the same group as the promoter;
(iv) arrangements where the receipt of contributions from the
holders of shares in the collective investment scheme
constitutes the acceptance of deposits in the course of a
business which is a deposit-taking business for the purpose
of the Banking Act (Cap. 488);
(v) contracts of insurance;
(vi) retirement benefits scheme;
"commodity" means—
(a) agricultural, livestock, fishery, forestry, mining or energy goods or
any product that is manufactured or processed from any such
goods;
(b) financial instruments;
(c) an index, right, or interest in any such commodity;
(d) such other thing as the Cabinet Secretary may, by notice in the
Gazette, determine to be the subject of a commodity contract;
"commodity contract" includes—
(a) spot commodity contract;
(b) commodity futures contract; and
(c) such other contract or class of contracts as the Authority may, by
regulations prescribe;
"commodity market" means a market or facility licensed by the Authority
or a facility, whether electronic or otherwise at which, offers or invitations to sell,
purchase or exchange commodity contracts are regularly made on a centralized
basis, being offers or invitations that are intended or may reasonably be
expected to result directly or indirectly in the acceptance or making, respectively
of offers to sell, purchase or exchange of commodity contracts but does not
include—
(a) the office or facilities of a commodity dealer or broker;
(b) the office or facilities of a clearing house;
“company” means a company formed and registered under the Companies
Act (Cap. 486);
“Compensation Fund” means the Investor Compensation Fund
established by section 18;
8
[Rev. 2022] CAP. 485A
Capital Markets
9
CAP. 485A [Rev. 2022]
Capital Markets
10
[Rev. 2022] CAP. 485A
Capital Markets
11
CAP. 485A [Rev. 2022]
Capital Markets
“options contract” means a contract that gives its holder the right and not
the obligation to buy or sell a fixed number of securities or any other instrument
at a fixed price on or before a given date;
“over the counter” means the trading of securities except in exchange-
traded derivatives contracts otherwise than at an approved securities exchange;
“promoter” means a person acting alone or in conjunction with others
directly or indirectly who takes the initiative in forming or organising the
business of a collective investment scheme but does not include an underwriter
commission without taking any part in the founding or organising of the collective
investment scheme business;
“quotation”, in relation to securities and in relation to a securities exchange,
or a derivatives exchange includes the displaying or providing, on a securities
exchange or a derivatives exchange, of information concerning—
(a) in a case where offers to sell, purchase or exchange the securities
at particular prices, or for particular consideration, are made or
accepted on that securities market or a derivatives market, those
prices or that consideration;
(b) in a case where offers or invitations are made on that securities
market or a derivatives market, being offers or invitations that
are intended, or may reasonably be expected, to result, whether
directly or indirectly, in the making or acceptance of offers to sell,
purchase or exchange the securities at particular prices or for
particular consideration, those prices or that consideration; or
(c) in any other case, the price at which, or the consideration for which
particular persons, or particular classes of persons, propose, or
may reasonably be expected, to sell, purchase or exchange the
securities;
“real estate investment trust” mean an arrangement in respect of real
estate or interest in real estate of any description, structured in accordance
with the rules prescribed by the Authority to enable a person taking part in the
arrangement, whether by becoming an owner of the property or any part of
it or otherwise, to participate in or receive profits or income arising from the
acquisition, holding, management or disposal of the real estate or interest in the
real estate or sums paid out of such profits of income;
“registered venture capital company” means a company approved by the
Authority and incorporated for purposes of providing risk capital to small and
medium sized businesses in Kenya with high growth potential, whereby not less
than seventy-five per cent of the funds so invested consist of equity or quasi-
equity investment in eligible enterprises;
“regulated person” means an operator of an approved person, a licensed
person, a listed company or a person approved to offer securities to the public;
"REIT manager" means a company incorporated in Kenya and licensed by
the Authority to provide real estate management services in respect of a real
estate investment trust;
“representative” means a representative of any person licensed by the
Authority who is in the employment of the licensed person and plays a critical
12
[Rev. 2022] CAP. 485A
Capital Markets
role in that company, and includes a trader, director, general manager, analyst,
or any other person employed by the licensee who plays a critical role;
“securities” means—
(a) shares in the share capital of a company ("shares");
(b) any instrument creating or acknowledging indebtedness which is
issued or proposed to be issued ("debt securities");
(c) loan stock, bonds and other instruments creating or
acknowledging indebtedness by or on behalf of the Government,
Central Bank, or public authority ("Government and public
entities");
(d) rights, options, or interests, whether described as units or
otherwise, in, or in respect of such shares, debt securities and
Government and public securities;
(e) any right, whether conferred by warrant or otherwise, to subscribe
for shares or debt securities ("warrants");
(f) any option to acquire or dispose of any other security;
(g) futures in respect of securities or other assets or property;
(h) securities and collective investment scheme products structured
in conformity with Islamic principles for investments;
(i) units in a collective investment scheme, including shares in an
investment company, or other similar entities whether established
in Kenya or not;
(j) interests, rights or property, whether in the form of an instrument
or otherwise, commonly known as securities;
(k) the rights under any depositary receipt in respect of shares, debt
securities and warrants ("depositary receipts");
(l) asset backed securities; and
(m) any other instrument prescribed by the Authority to be securities
for the purposes of this Act,
but does not include—
(i) securities of a private company, other than asset backed
securities;
(ii) bills of exchange;
(iii) promissory notes, other than asset backed securities;
(iv) certificates of deposit issued by a bank; and
(v) any other instrument prescribed by the Authority not to be
securities for the purposes of this Act;
“securities exchange” means a market, derivatives exchange, securities
organization or other place at which securities are offered for sale, purchase
or exchange, including any clearing or settlement, with or without novation, or
transfer services connected therewith;
“self-regulatory organization” means an organization whose object is to
regulate the operations of its members or of the users of its services and
includes the organizations that may be recognized as such, by the Authority;
“share” means a share in the share capital of a body corporate, a unit in a
unit trust or an interest in any collective investment scheme;
13
CAP. 485A [Rev. 2022]
Capital Markets
14
[Rev. 2022] CAP. 485A
Capital Markets
15
CAP. 485A [Rev. 2022]
Capital Markets
than fifteen per cent of the votes attached to the voting shares in the
body corporate.
(3) A person shall be deemed to have an interest in a security in any one or
more of the following circumstances—
(a) where he has entered into a contract to purchase a security;
(b) where he has a right, otherwise than by reason of having an interest
under a trust, to have a security transferred to himself or to his order,
whether the right is exercisable presently or in the future and whether
on the fulfillment of a condition or not;
(c) where he has the right to acquire a security, or an interest in a security,
under an option, whether on the fulfillment of a condition or not; or
(d) where he is entitled, otherwise than by reason of his having been
appointed a proxy or representative to vote at a meeting of members
of a body corporate or of a class of its members, to exercise or control
the exercise of a right attached to a security, not being a security of
which he is the registered holder.
(4) A person shall be deemed to have an interest in a security if that security
is held jointly with another person.
(5) For the purpose of determining whether a person has an interest in a
security, it is immaterial that the interest cannot be related to a particular security.
(6) There shall be disregarded—
(a) an interest in a security if the interest is that of a person who holds
the security as bare trustee;
(b) an interest in a security of a person whose ordinary business includes
the lending of money if he holds the interest only by way of security
for the purposes of a transaction entered into in the ordinary course
of business in connection with the lending of money;
(c) an interest of a person in a security being an interest held by him by
reason of his holding a prescribed office; and
(d) a prescribed interest in a security being an interest of such person, or
of the persons included in such class of persons as is prescribed.
(7) An interest in a security shall not be disregarded by reason only of—
(a) its remoteness;
(b) the manner in which it arose; or
(c) the fact that the exercise of a right conferred by the interest is, or is
capable of being made, subject to restraint or restriction.
PART II – THE CAPITAL MARKETS AUTHORITY
5. Establishment and membership of the Authority
(1) There is hereby established an authority to be known as the Capital Markets
Authority.
(2) The Authority shall be a body corporate with perpetual succession and a
common seal and shall be capable in its corporate name of—
(a) suing and being sued;
(b) taking, purchasing or otherwise acquiring, holding, charging and
disposing of both movable and immovable property;
16
[Rev. 2022] CAP. 485A
Capital Markets
17
CAP. 485A [Rev. 2022]
Capital Markets
(8) The members of the Authority shall be paid such remuneration and
allowances out of the general fund of the Authority as may be determined by the
Minister.
[Act No. 3 of 2000, s. 5.]
18
[Rev. 2022] CAP. 485A
Capital Markets
19
CAP. 485A [Rev. 2022]
Capital Markets
20
[Rev. 2022] CAP. 485A
Capital Markets
21
CAP. 485A [Rev. 2022]
Capital Markets
(o) have recourse against any person whose act or omission has resulted
in a payment from the Compensation Fund;
(p) act as an appellate body in respect of appeals against any self
regulatory organization securities or exchange-traded derivatives
contracts exchange, derivatives exchange or central depository in
actions by parties aggrieved thereby;
(q) co-operate or enter into agreements for mutual co-operation with
other regulatory authorities for the development and regulation of
cross-border activities in capital markets;
(r) regulate and oversee the issue and subsequent trading, both in
primary and secondary markets, of capital market instruments;
(s) regulate the use of electronic commerce for dealing in securities or
offer services ordinarily carried out by a licensed person;
(t) trace any assets, including bank accounts, of any person who, upon
investigation by the Authority, is found to have engaged in any
fraudulent dealings in an issuer and its securities or insider trading;
(u) in writing, order caveats to be placed against the title to such assets
or prohibit any such person from operating any such bank accounts
as may be directed by the Authority, pending determination of any
charges instituted against that person;
(v) prescribe notices or guidelines on corporate governance of a
company whose securities have been issued to the public or a section
of the public;
(va) ensure processing of personal data in the operations of capital
markets is in accordance with principles set out under the Data
Protection Act, 2019;
(w) do all such other acts as may be incidental or conducive to the
attainment of the objectives of the Authority or the exercise of its powers under
this Act.
[Act No. 10 of 1994, s. 2, Act No. 3 of 2000, s. 9, Act No. 9 of 2007, s. 46, Act No. 8 of 2008,
s. 48, Act No. 37 of 2011, s. 3, Act No. 48 of 2013, s. 6, Act No. 38 of 2016, s. 69, Act No. 15
of 2018, s. 3, Act No. 23 of 2019, s. 42, Act No. 24 of 2019, Sch., Act No. 8 of 2020, s. 30.]
22
[Rev. 2022] CAP. 485A
Capital Markets
23
CAP. 485A [Rev. 2022]
Capital Markets
(3) For the purposes of this Act, stakeholders shall include listed companies
and all persons licensed or approved by the Authority or financial or other
institutions whose operations have, in the opinion of the Authority, a bearing on the
development and regulation of capital markets in Kenya.
[Act No. 10 of 1994, s. 3, Act No. 3 of 2000, s. 10, Act No. 15 of 2003, s. 46, Act No.
4 of 2004, s. 74, Act No. 8 of 2008, s. 49, Act No. 37 of 2011, s. 3, Act No. 35 of 2012, s.
3, Act No. 57 of 2012, s. 30, Act No. 48 of 2013, s. 7, Act No. 38 of 2016, ss. 49 & 70.]
24
[Rev. 2022] CAP. 485A
Capital Markets
25
CAP. 485A [Rev. 2022]
Capital Markets
(c) to direct any person who has control over such assets to take any
action with respect to such assets as the Authority may reasonably
require with a view to protecting the assets until the court determines
the appropriate course of action.
(4) In the interest of bank confidentiality, the powers of the officer in respect
of any documents held by a banker shall be limited to making copies or extracts
therefrom.
[Act No. 8 of 2008, s. 50.]
26
[Rev. 2022] CAP. 485A
Capital Markets
14. Committees
(1) The Authority may appoint committees, whether of its own members or
otherwise, to carry out such general or special functions as may be specified by
the Authority, and may delegate to any such committee such of its powers as the
Authority may deem appropriate.
(2) Without prejudice to the generality of subsection (1), the Authority shall
establish—
(a) a committee to hear and determine complaints of shareholders of any
public company listed on an authorized securities exchange, relating
to the professional conduct or activities of such securities exchange
or such public company, or any other person under the jurisdiction of
the Authority and recommend actions to be taken, in accordance with
rules established by the Authority for that purpose; and
(b) a committee to make recommendations with respect to assessing
and awarding compensation in respect of any application made in
accordance with rules established by the Authority for that purpose.
[Act No. 3 of 2000, s. 11.]
27
CAP. 485A [Rev. 2022]
Capital Markets
(a) such moneys as are required to be paid into the Compensation Fund
by licensed persons;
(b) such sums of money as are paid under this Act as fines or penalties
or under section 34 as ill-gotten gains where those harmed are not
specifically identifiable;
(c) such sums of money as accrue from interest and profits from investing
Compensation Fund moneys;
(d) such sums of money recovered by or on behalf of the Authority from
entities whose failure to meet their obligations to investors result in
payments from the Compensation Fund;
(e) interest deemed to accrue on the proceeds of a public issue or
offer for sale of shares of a company listed or to be listed on an
approved securities exchange, between the closing date and the date
of dispatch of refund cheques, or, where there is no refund, the date
of dispatch of share certificates or crediting of securities accounts, to
be determined at the rate prescribed by the Authority;
(ee) deleted by Act No. 48 of 2013, s. 9(a);
(f) such sums of money as are received for purposes of the
Compensation Fund from any other source approved by the Minister.
(2A) The Authority may reward any person who provides new and timely
information leading to the recovery of sums of money referred to in subsection (2):
Provided that—
(a) this provision shall not apply to any officer of the Authority;
(b) the reward payable under this subsection shall be three per cent of the
amount recovered subject to a maximum of five million shillings; and
(c) the reward referred to in paragraph (a) shall be paid before the
recovered sums of money are transferred to the Fund.
(2B) The Cabinet Secretary shall make regulations to give effect to the
provisions of subsection (2A).
(2C) A person who—
(a) colludes with an officer of the Authority for the purpose of collecting
the reward under subsection (2A);
(b) while working at the Authority aids another person to get and provide
information under subsection (2A);
(c) provides false information under subsection (2A),
commits an offence and shall on conviction be liable to a fine not exceeding five
million shillings or to imprisonment for a term not exceeding five years.
(3) Moneys which have accumulated in the Compensation Fund may be
invested by the Authority.
[Act No. 3 of 2000, s. 12, Act No. 10 of 2006, s. 39, Act No. 9 of 2007, s. 47, Act No. 8
of 2008, s. 51, Act No. 48 of 2013, s. 9, Act No. 15 of 2018, s. 5, Act No. 8 of 2020, s. 31.]
18A. Repealed
Repealed by Act No. 15 of 2018, s. 6.
28
[Rev. 2022] CAP. 485A
Capital Markets
29
CAP. 485A [Rev. 2022]
Capital Markets
30
[Rev. 2022] CAP. 485A
Capital Markets
31
CAP. 485A [Rev. 2022]
Capital Markets
32
[Rev. 2022] CAP. 485A
Capital Markets
33
CAP. 485A [Rev. 2022]
Capital Markets
34
[Rev. 2022] CAP. 485A
Capital Markets
(3) Nothing in this section shall preclude the Authority, in any case where a
securities exchange fails to act against a trading participant or a listed company or a
derivatives exchange fails to act against a futures member, from itself, suspending,
expelling or otherwise disciplining the subject person, but before doing so the
Authority shall give such persons and the exchange an opportunity to be heard.
[Act No. 10 of 2010, s. 48, Act No. 48 of 2013, s. 14.]
35
CAP. 485A [Rev. 2022]
Capital Markets
36
[Rev. 2022] CAP. 485A
Capital Markets
37
CAP. 485A [Rev. 2022]
Capital Markets
(2) The limits upon exchange-traded derivatives contracts' positions and trading
fixed by the Authority under subsection (1) shall apply to positions held by, and
trading done by two or more persons acting in accordance with an express or
implied agreement or understanding, as if the positions were held by, or the trading
done by a single person.
(3) A person shall not, directly or indirectly—
(a) buy or sell or agree to buy or sell, under an exchange-traded
derivatives contract traded on the derivatives market of or subject to
the rules of a derivatives exchange, any number of contracts in excess
of the trading limits fixed for one business day or any other stated
period set by the Authority; or
(b) hold or control a gross buy or sell position under an exchange-traded
derivatives contract traded on the derivatives market of or subject to
the rules of a derivatives exchange in excess of any position limit fixed
by the Authority.
(4) Nothing in this section shall preclude the Authority from—
(a) fixing different trading or position limits for different exchange-
traded derivatives contracts, different delivery months or for different
days remaining until the last day of trading in an exchange-traded
derivatives contract; or
(b) exempting transactions under this section.
[Act No. 48 of 2013, s. 15.]
38
[Rev. 2022] CAP. 485A
Capital Markets
(4) Nothing in this section shall be construed as limiting the powers of the
Authority to approve or license any other person operating in any other capacity
which has a direct impact on the attainment of the objectives of this Act.
[Act No. 3 of 2000, s. 15, Act No. 2 of 2002, Sch., Act No. 8 of 2008, s. 53, Act
No. 37 of 2011, s. 10, Act No. 48 of 2013, s. 16, Act No. 38 of 2016, ss. 50 & 77.]
39
CAP. 485A [Rev. 2022]
Capital Markets
(2) Without prejudice to the generality of subsection (1) the Authority may, in
considering whether a person is fit and proper—
(a) take into account whether the person—
(i) has contravened the provision of any law, in Kenya or
elsewhere, designed for the protection of members of the public
against financial loss due to dishonesty, incompetence, or
malpractice by persons engaged in transacting with marketable
securities;
(ii) was a director of a licensed person who has been liquidated or
is under liquidation or statutory management;
(iii) has taken part in any business practice which, in the opinion of
the Authority, was fraudulent prejudicial to the market or public
interest, or was otherwise improper, which would otherwise
discredit the person's methods of conducting business; or
(iv) has taken part or has been associated with any business
practice which casts doubt on the competence or soundness of
judgment of that person; or
(v) has acted in such a manner as to cast doubt on the person's
competence and soundness of judgment;
(b) take into account any information in the possession of the Authority,
whether provided by the applicant or not, relating to—
(i) any person who is to be employed by, associated with, or who
shall be acting for or on behalf of, the applicant for the purposes
of a regulated activity, including an agent;
(ii) where the applicant is a company in a group of companies—
(A) any other company in the same group of companies; or
(B) any substantial shareholder or key personnel of the
company or any company referred to in subparagraph
(a);
(c) take into account whether the applicant has established effective
internal control procedures and risk management systems to ensure
its compliance with all applicable regulatory requirements; and
(d) have regard to the state of affairs of any other business which the
person carries on or purports to carry on.
(3) The Authority shall give a person an opportunity to be heard before
determining whether the person is fit and proper for the purposes of this Act.
(4) For the purposes of this section, "group of companies" means any two or
more companies one of which is the holding company of the others.
[Act No. 35 of 2012, s. 6.]
25. Repealed
Repealed by Act No. 48 of 2013, s. 18.
25A. Imposition of additional sanctions and penalties
(1) Without prejudice to any other provision of this Act, the Authority may
impose the following sanctions or levy financial penalties in accordance with this
Act, for the breach of any provisions of this Act, the regulations, rules, guidelines,
notices or directions made thereunder, or the rules of procedure of a securities,
40
[Rev. 2022] CAP. 485A
Capital Markets
41
CAP. 485A [Rev. 2022]
Capital Markets
(3) The Authority shall make orders under subsection (2) where the breach of
the provisions of this Act or the regulations made under the Act results in a loss to
one or more aggrieved persons, but subject to the following conditions—
(a) that the amount of the loss is quantified and proved to the Authority
by the person making the claim; and
(b) that notice is served by the Authority on the person expected to make
the restitution, containing details of the amount claimed and informing
them of their right to be heard.
(4) The Authority shall, in its annual report, publish the names of persons
against whom actions has been taken by the Authority under this Part.
(5) For the purposes of this Act, an act, omission or failure of an agent,
employee or any other person acting on behalf of a licensed person shall be
considered to be the act, omission or failure of the licensed person as well as of
the agent, employee or any other person acting as such.
(6) The financial penalties with respect to—
(a) a breach of trading rules of a securities exchange by a licensed person
shall be double the brokerage commission payable to the licensed
person on the relevant trade, or double the annual fees, whichever
is higher;
(b) failure to comply with a reporting requirement by an issuer or a
licensed person shall be double the applicable prescribed annual
listing fee or license fee, whichever is higher, for every calendar
quarter during which the reporting requirement remains outstanding;
and
(c) failure on the part of the securities exchange to enforce and ensure
compliance with this Act and the rules of the exchange as approved by
the Authority, shall be equal to the annual license fee of the securities
exchange.
[Act No. 9 of 2007, s. 50, Act No. 8 of 2008, s. 55, Act No. 48 of 2013, s. 19,
Act No. 38 of 2016, s. 78, Act No. 15 of 2018, s. 7, Act No. 23 of 2019, s. 43.]
42
[Rev. 2022] CAP. 485A
Capital Markets
43
CAP. 485A [Rev. 2022]
Capital Markets
44
[Rev. 2022] CAP. 485A
Capital Markets
45
CAP. 485A [Rev. 2022]
Capital Markets
(c) to receive more than twenty five percent of the aggregate dividends
and interest on shareholders loans to be paid in any given financial
year,
shall not be appointed as a key personnel of that company.
(6) The Authority shall, in determining whether a person has direct or indirect
control or beneficial entitlement for the purposes of subsection (4) and (5), have
regard to whether that person is an associate or party to any contract, arrangement
or understanding between persons that may allow for control to be exercised
directly or indirectly in relation to the company.
(7) For the purposes of subsection (4), (5) and (6), “company” means—
(a) a stockbrokerage;
(b) an investment bank;
(c) a fund manager; or
(d) derivatives broker;
(e) such other class of licensee as may be prescribed by the Authority by
notice in the Gazette.
[Act No. 14 of 1991, Act No. 10 of 1994, s. 5, Act No. 3 of 2000, s. 21, Act No. 2 of 2002,
Sch., Act No. 9 of 2007, s. 51, Act No. 8 of 2008, s. 56, Act No. 10 of 2010, s. 49, Act No. 37
of 2011, s. 11, Act No. 35 of 2012, s. 7, Act No. 48 of 2013, s. 22, Act No. 22 of 2022, s. 54.]
46
[Rev. 2022] CAP. 485A
Capital Markets
investment company within the meaning of this Act shall be entitled to carry on such
business without registration for a period of six months from such commencement:
Provided that such person shall apply for and obtain registration under this Act
prior to the expiration of such period.
(7) During the period referred to in subsection (6), the investment company shall
be subject to all the provisions of this Act except the requirement as to registration.
(8) No registered collective investment scheme shall, in or outside Kenya,
offer its shares to the public unless prior to such offer, it publishes in writing an
information memorandum signed by or on behalf of its officers and files a copy
thereof with the Authority.
(9) Every information memorandum under subsection (8) shall comply with
such requirements as may be prescribed by the Authority.
(10) Subject to the provisions of this Act, any regulations, rules, guidelines or
notices issued thereunder, or anything contained in the articles of association or
information memorandum, a mutual fund shall be a body corporate with perpetual
succession and a common seal and shall be capable, in its corporate name, of
doing and performing all things and acts which may lawfully be done by a body
corporate.
[Act No. 3 of 2000, s. 22, Act No. 48 of 2013, s. 23.]
47
CAP. 485A [Rev. 2022]
Capital Markets
48
[Rev. 2022] CAP. 485A
Capital Markets
49
CAP. 485A [Rev. 2022]
Capital Markets
(2) An issuer shall, in addition to the obligations imposed under subsection (1)
comply with such other requirements as the Authority may prescribe.
(3) A person who contravenes this section commits an offence.
[Act No. 48 of 2013, s. 24.]
50
[Rev. 2022] CAP. 485A
Capital Markets
51
CAP. 485A [Rev. 2022]
Capital Markets
52
[Rev. 2022] CAP. 485A
Capital Markets
53
CAP. 485A [Rev. 2022]
Capital Markets
(4) A person shall not issue or offer any asset backed security other than to a
seller or an originator of the asset backed security.
(5) A person shall not issue an asset backed security unless it is made in
accordance with a prospectus or an offering memorandum.
(6) The Authority may prescribe the contents of a prospectus or offering
memorandum taking into consideration on the classification of the issue or offer
and the nature of the assets backing the securities or such other factors that the
Authority may consider appropriate.
(7) Where a limited restricted offer is made, the issuer shall file an information
notice with the Authority.
(8) For the purposes of this Act, a person offers asset backed securities if that
person invites another person to enter into an agreement for or with the view to
subscribing for or otherwise acquiring or underwriting any asset backed securities,
or if he invites another person to make such an offer.
(9) A person who contravenes any provisions of this section commits an
offence.
[Act No. 48 of 2013, s. 24.]
54
[Rev. 2022] CAP. 485A
Capital Markets
30M. Trustees
(1) The Authority may, from time to time, prescribe the qualifications of a person
to be appointed as a trustee.
(2) A trustee shall—
(a) be the custodian of the assets of a securitisation trust;
(b) manage the operation of the securitisation trust and the securitisation
transaction in a fiduciary capacity,
to give effect to the objectives and purposes of the trust for the benefit of the
beneficiaries in accordance with the trust deed, any other law governing trustees
and the transaction documentation.
(3) All assets of the securitisation trusts shall be held by the trustee in trust for
the investors in asset backed securities as the beneficiaries of the securitisation
trust may consider appropriate.
(4) Except as specifically provided for in the trust deed, and to the extent that
the trust deed relates to the implementation and operation of the securitisation
trust and securitisation transaction, the preservation of assets and fulfilment by the
trustee of its fiduciary obligations, the assets of a securitisation trust shall not be
available to—
(a) the trustee;
(b) any creditors of the trustee;
(c) any other claimants against the trustee; or
(d) satisfy any liabilities of the trustee.
(5) The assets of a securitisation trust shall not be included in the assets of
trustee in the event the trustee is declared insolvent, wound up, placed under
administration, dissolved, amalgamated or restructured.
55
CAP. 485A [Rev. 2022]
Capital Markets
(6) A trust deed shall contain such information, including the roles and duties
of a trustee, as the Authority may prescribe.
(7) A trustee shall, in addition to such other duties and obligations as may be
imposed on it under any other written law, perform such other roles and duties as
the Authority may prescribe.
[Act No. 48 of 2013, s. 24.]
56
[Rev. 2022] CAP. 485A
Capital Markets
trustee or any auditor may require to fulfil its obligations under the
securitisation trust transaction.
[Act No. 48 of 2013, s. 24.]
57
CAP. 485A [Rev. 2022]
Capital Markets
58
[Rev. 2022] CAP. 485A
Capital Markets
shall apply to restricted offers in the same manner as if the asset backed
securities had been listed.
[Act No. 48 of 2013, s. 24.]
59
CAP. 485A [Rev. 2022]
Capital Markets
60
[Rev. 2022] CAP. 485A
Capital Markets
61
CAP. 485A [Rev. 2022]
Capital Markets
written consent, or borrow, or arrange to borrow, using the securities, carried for
the account of any customer, as collateral, without the customer’s written consent.
(5) No licensed person, broker or dealer shall effect any transaction in, or induce
or attempt to induce the purchase or sale of, any listed security by means of any
manipulative deception, or other fraudulent device or contrivance.
(6) No person holding shares in a public company listed on an approved
securities exchange, shall sell or transfer such shares except in compliance with
the trading procedures adopted by such securities exchange.
(7) No person shall, directly or indirectly, in connection with the purchase or
sale of any security—
(a) employ any device, scheme or artifice to defraud;
(b) engage in any act, practice or course of business which operates or
would operate as a fraud or deceit upon any person;
(c) make any untrue statement of a material fact; or
(d) omit to state a material fact necessary in order to make the statements
made in light of the circumstances under which they were made, not
misleading.
(8) A person who contravenes this section commits an offence.
[Act No. 10 of 1994, s. 6, Act No. 3 of 2000, s. 24, Act No. 8 of 2009 s. 45,
Act No. 10 of 2010, s. 50, Act No. 37 of 2011, s. 12, Act No. 48 of 2013, s. 26.]
62
[Rev. 2022] CAP. 485A
Capital Markets
63
CAP. 485A [Rev. 2022]
Capital Markets
64
[Rev. 2022] CAP. 485A
Capital Markets
65
CAP. 485A [Rev. 2022]
Capital Markets
32JA. Front-running
(1) Any person in a market intermediary who has insider information on client
orders with a price differential or is aware of such orders and effects an own account
transaction in the securities concerned or in any related investments directly or
through any other person, to take advantage of the price differential before the
client order is executed commits an offence.
(2) Any other person who facilitates the commission of the offence referred to
in subsection (1) commits an offence.
[Act No. 15 of 2018, s. 9.]
66
[Rev. 2022] CAP. 485A
Capital Markets
(b) company, to a fine not exceeding ten million shillings and payment of
twice the amount of the gain made or loss avoided.
[Act No. 48 of 2013, s. 27.]
67
CAP. 485A [Rev. 2022]
Capital Markets
(a) the decision to enter into the transaction was taken on its behalf by a
person other than the officer;
(b) it had in operation at that time arrangements to ensure that the
information was not communicated to that person and that no advice
with respect to the transaction was given to him by a person in
possession of the information; and
(c) the information was not so communicated and such advice was not
so given.
(8) A body corporate is not precluded by subsection (6) from dealing in
securities of another body corporate at any time by reason only of information in the
possession of an officer of that first-mentioned body corporate, being information
that was obtained by the officer in the course of the performance of his duties as an
officer of that first-mentioned body corporate and that relates to proposed dealings
by that first-mentioned body corporate in securities of that other body corporate.
(9) For the purpose of this section, a person is connected with a body corporate
if, being a natural person—
(a) he is an officer of that body corporate or of a related body corporate;
(b) he is a substantial shareholder in that body corporate or in a related
body corporate; or
(c) he occupies a position that may reasonably be expected to give him
access to information of a kind to which subsections (1) and (2) apply
by virtue of—
(i) any professional or business relationship existing between
himself (or his employer or a body corporate of which he is an
officer) and that body corporate or a related body corporate; or
(ii) his being an officer of a substantial shareholder in that body
corporate or in a related body corporate.
(10) This section does not preclude the holder of a stockbroker’s or dealer’s
licence from dealing in securities, or rights or interests in securities, of a body
corporate, being securities or rights or interests that are permitted by a securities
exchange to be traded on the stock market of that securities exchange, if—
(a) the holder of the licence enters into the transaction concerned as
agent for another person pursuant to a specific instruction by that
other person to effect that transaction;
(b) the holder of the licence has not given any advice to the other person
in relation to dealing in securities, or rights or interests in securities,
of that body corporate that are included in the same class as the first-
mentioned securities; and
(c) the other person is not associated with the holder of the licence.
(11) For the purpose of subsection (8), “officer”, in relation to a body corporate,
includes—
(a) a director, secretary, executive officer or employee of the body
corporate;
(b) a receiver, or receiver and manager, of property of the body corporate;
(c) an official manager or a deputy official manager of the body corporate;
(d) a liquidator of the body corporate; and
68
[Rev. 2022] CAP. 485A
Capital Markets
69
CAP. 485A [Rev. 2022]
Capital Markets
70
[Rev. 2022] CAP. 485A
Capital Markets
Provided that the statutory manager may offset the liabilities owed by
the licensed person to any creditor against any debts owed by that
creditor to the licensed person;
(b) suspend the running of time for the purposes of any law of limitation of
actions in respect of any claim by a creditor of the licensed person; or
(5B) A moratorium shall cease to apply upon the termination of the statutory
manager’s appointment, whereupon the rights and obligations of the licensed
person and creditors shall, save to the extent provided in subsection (5A)(b), be the
same as if there had been no declaration under the provisions of that subsection:
Provided that a moratorium declared by the statutory manager for payment shall
not exceed twelve months.
(6) The statutory manager shall, once every month, furnish the Authority
the shareholders of the licensed person which has been placed under statutory
management and any other person whom the Authority may direct in writing with
a report of his activities during the preceding month, in such form as may be
prescribed by the Authority.
(7) If any officer or employee of the licensed person removed under the
provisions of subsection (2)(b) is aggrieved by the decision, he may appeal to
the Capital Markets Tribunal, and the Tribunal may confirm, reverse or modify
the decision and make any other order in the circumstances as it thinks just; and
pending the determination of the appeal, the order of removal shall remain in effect.
(8) Neither the Authority nor any officer or employee thereof nor any manager
nor any other person appointed, designated or approved by the Authority under
this Act shall be liable in respect of any act or omission done in good faith by
such officer, employee, manager or other person in the execution of the duties
undertaken by him.
(9) Where it appears to the statutory manager that it is just and equitable
to do so in the interest of all interested parties, the statutory manager may after
consultation with the Authority, petition the High Court for the winding-up of the
licensed person.
(10) All costs and expenses properly incurred by the statutory manager shall
be payable out of the assets of the licensed person in priority to all other claims.
[Act No. 3 of 2000, s. 29, Act No. 9 of 2007, s. 52,
Act No. 8 of 2008, s. 57, Act No. 48 of 2013, s. 28.]
71
CAP. 485A [Rev. 2022]
Capital Markets
are being or have been conducted in a manner that is prejudicial to the interests
of its members or investors in its securities or the investors in the securities market
or of some part of the members or investors or conducted contrary to the law, make
an application to the Court for an order under subsection (2).
(2) The Court may, if it is satisfied that the an application under subsection (1),
raises reasonable grounds, make an order—
(b) restraining the carrying out of the act or conduct;
(c) requiring the company to bring in its name, proceedings against the
persons on such terms as the Court may impose;
(d) appointing a receiver or manager for the whole or part of the property
or business of the company and may specify the powers and duties
of the receiver or manager;
(e) imposing such conditions as the Court may consider fit whether for
regulating the conduct of the affairs of the company in future, or for
the purchase of the shares of any members of the company by other
members of the company or by the company and, in the case of a
purchase by the company, for the reduction accordingly of the capital
of the company or otherwise.
(3) The Court may, if, on an application under this section, it is of the
opinion that the management and activities of a special purpose vehicle or
a securitisation transaction are being conducted contrary to the terms of the
transaction documentation or the law, whether or not the conduct consists of an
isolated act or a series of acts—
(a) make an order restraining the carrying out of the act;
(b) make an order directing the trustee to institute such proceedings the
as Court may consider appropriate against the person, on terms the
Court orders;
(c) make an order for the change of the trustee, appointment of a receiver
or manager of the trust and may specify the powers and duties of the
receiver or manager; or
(d) make such other order the Court may consider appropriate, whether
for regulating the conduct of the securitisation transaction or special
purpose vehicle affairs in future, to recover assets or provide for
compensation or otherwise to protect the interests of investors in the
asset backed securities.
(4) A company shall not, where an order under this section has the effect of
altering its constitution, without the leave of the Court, make any further alteration
to the constitution which is inconsistent with the order.
[Act No. 4 of 2004, s. 75, Act No. 48 of 2013, s. 29.]
72
[Rev. 2022] CAP. 485A
Capital Markets
73
CAP. 485A [Rev. 2022]
Capital Markets
(4) The powers in respect of any documents held by a bank shall be limited to
the making of copies or extracts.
(5) A person who contravenes this section commits an offence.
[Act No. 48 of 2013, s. 29.]
33E. Winding up
The Authority may, if it appears to it that it is desirable, for the protection of clients
or investors, that a licensed person should be wound up under the Companies Act
(Cap. 486) or relevant constituting document, present a petition for the licensed
person to be wound up or institute winding up proceedings under the relevant
instrument on the ground that it is just and equitable that the licensed person should
be wound up.
[Act No. 48 of 2013, s. 29.]
74
[Rev. 2022] CAP. 485A
Capital Markets
75
CAP. 485A [Rev. 2022]
Capital Markets
(c) specify the offence committed, the sum of money ordered to be paid,
and the date to which payment is due.
(3) Where the amount ordered to be paid under subsection (1)—
(a) is paid to the Authority within fourteen days of the order, the Authority
shall not institute any proceedings against that person; or
(b) is not paid within fourteen days of the order, the Authority may institute
proceedings in relation to the offence.
(4) The Authority shall pay all sums of money received under this section into
the Investor Compensation Fund.
(5) The compounding of an offence under this section shall not prejudice any
orders for compensation or restitution that may be imposed by the Authority.
[Act No. 48 of 2013, s. 32.]
76
[Rev. 2022] CAP. 485A
Capital Markets
(c) one accountant who shall have been in practice for a period of not
less than seven years; and
(d) two persons who have demonstrated competence in the field of
securities;
(e) the secretary shall be an advocate with at least five years’ experience
commercial law.
(2) All appointments to the Tribunal under subsection (1) shall be by notice in
the Gazette issued by the Minister and shall be for a period of three years.
(3) The office of a member of the Tribunal shall become vacant—
(a) at the expiration of three years from the date of his appointment;
(b) if he accepts any office the holding of which, if he were not a member
of the Tribunal, would make him ineligible for appointment to the office
of a member of the Tribunal;
(c) if he is removed from membership of the Tribunal by the Minister
for failure to attend three consecutive meetings of the Tribunal or is
unable to discharge the functions of his office (whether arising from
infirmity of body or mind or from any other cause) or for misbehaviour;
or
(d) if he resigns from the office of a member of the Tribunal.
(4) The Tribunal shall, upon an appeal made to it in writing by an aggrieved
party following a determination by the Authority on any matter relating to this Act,
inquire into the matter and make an award thereon, and every award made shall
be notified by the Tribunal to the parties concerned and the Authority as the case
may be.
(5) For the purposes of hearing an appeal, the Tribunal shall have all the powers
of the High Court to summon witnesses, to take evidence upon oath or affirmation
and to call for the production of books and other documents.
(6) Where the Tribunal considers it desirable for the purposes of avoiding
expenses or delay or any other special reasons so to do, it may receive evidence
by affidavit and administer interrogatories within the time specified by the Tribunal.
(7) In its determination of any matter the Tribunal may take into consideration
any evidence which it considers relevant to the subject of an appeal before it,
notwithstanding that such evidence would not otherwise be admissible under the
law relating to evidence.
(8) The Tribunal shall have power to award the costs of any proceedings before
it and to direct that costs shall be taxed in accordance with any scale prescribed.
(9) All summonses, notices or other documents issued under the hand of the
chairman of the Tribunal shall be deemed to be issued by the Tribunal.
(10) Any interested party may be represented before the Tribunal by an
advocate or by any other person whom the Tribunal may admit to be heard on
behalf of such party.
(11) The Tribunal shall sit at such times and in such places as it may appoint.
(12) The proceedings of the Tribunal shall be open to the public save where
the Tribunal, for good cause, otherwise directs.
(13) Except as expressly provided in this Act or any rules made thereunder,
the Tribunal shall regulate its own procedure.
77
CAP. 485A [Rev. 2022]
Capital Markets
(14) For the purposes of hearing and determining any cause or matter under
this Act, the chairman and two members of the Tribunal shall form a quorum.
(15) A member of the Tribunal who has an interest in any matter which is the
subject of the proceedings of the Tribunal shall not take part in those proceedings.
(16) Upon any appeal, the Tribunal may—
(a) confirm, set aside or vary the order or decision in question;
(b) exercise any of the powers which could have been exercised by the
Authority or any of its committees in the proceedings in connection
with which the appeal is brought; or
(c) make such other order, including an order, for costs, as it may deem
just.
(17) The Tribunal shall hear and determine an appeal within ninety days from
the date of filing of the appeal.
(18) The Tribunal shall have power to award the costs of any proceedings
before it and to direct that costs shall be paid in accordance with any scale
prescribed for suits in the High Court or to award a specific sum as costs.
(19) Where the Tribunal awards costs in an appeal, it shall, on application by
the person to whom the costs are awarded, issue to him a certificate stating the
amount of the costs.
(20) Every certificate issued under subsection (19) may be filed in the High
Court by the person in whose favour the costs have been awarded and upon being
so filed, shall be deemed to be a decree of the High Court and may be executed
as such.
(21) The Chief Justice may make rules governing the making of appeals
and providing for the fees to be paid, the scale of costs of any such appeal, the
procedure to be followed therein, and the manner of notifying the parties thereto;
and until such rules are made, and subject thereto; the provisions of the Civil
Procedure Act (Cap. 21) shall apply as if the matter appealed against were a decree
of a subordinate court exercising original jurisdiction.
(22) Any party to proceedings before the Tribunal who is dissatisfied by a
decision or order of the Tribunal on a point of law may, within thirty days of the
decision or order, appeal against such decision or order to the High Court.
(23) No decision or order of the Tribunal shall be enforced until the time for
lodging an appeal has expired or where the appeal has been commenced until the
appeal has been determined.
(24) Upon the hearing of an appeal under this section, the High Court may—
(a) confirm, set aside or vary the decision or order in question;
(b) remit the proceedings to the Tribunal with such instructions for further
consideration, report, proceedings or evidence as the court may deem
fit to give;
(c) exercise any of the powers which could have been exercised by the
Tribunal in the proceedings in connection with which the appeal is
brought; or
(d) make such other order as it may deem just, including an order as to
costs of the appeal of earlier proceedings in the matter before the
Tribunal.
78
[Rev. 2022] CAP. 485A
Capital Markets
(25) There shall be paid to the chairman, secretary and the members of the
Tribunal, such remuneration and allowances as the Minister shall, from time to
time, determine.
(26) All expenses of the Capital Markets Tribunal shall be charged to the
general fund of the Authority.
[Act No. 3 of 2000, s. 32, Act No. 15 of 2018, s. 11, Act No. 8 of 2021, s. 54.]
79
CAP. 485A [Rev. 2022]
Capital Markets
(4) The Authority may approve the rules of the exchange aforesaid relating to
its derivatives operations within thirty days of submission of the draft rules or of any
changes requested thereon by the Authority.
[Act No. 48 of 2013, s. 34.]
37. Supercession
Where there is a conflict between the provisions of this Act and the provisions of
any other written law with regard to the powers or functions of the Authority under
this Act, the provisions of this Act shall prevail.
[Act No. 3 of 2000, s. 34.]
80