Nairobi, 9 March, 2016…The Capital Markets Authority (CMA) recognizes the support of the National Treasury resulting in the gazettement of the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2016 and Guidelines on the Prevention of Money Laundering and Terrorism Financing in the Capital Markets, 2016. The new laws were gazetted on 4 March, 2016.

Speaking on the enactment of the new laws, Capital Markets Authority Acting Chief Executive Mr. Paul Muthaura said, ‘the gazettement of the new laws is a demonstration of the Government’s support to the continued implementation of the Capital Market Master Plan. This will bolster the efforts that the industry continues to put in place to ensure that Kenya is able to attract local and foreign interest and investment’.

The Capital Market Master Plan, the industry’s 10-year blueprint recognizes that sound corporate governance, reliable and transparent financial reporting and effective frameworks to tackle money laundering and combat terrorist financing are pre-conditions to the development of the capital markets in Kenya as well as the realization of the Vision 2030 goal of establishing Nairobi as an international financial center.

‘The newly gazetted Code of Corporate Governance Practices for Issuers of Securities to the Public 2016 was developed as part of wider corporate governance reforms. The reforms were informed by the need to respond to the changing business environment and the desire to align local standards to global best practice to promote institutional strengthening for listed companies’, said Mr. Muthaura.

The new Corporate Governance Code is based on an ‘apply or explain’ principle, a change from the ‘comply or explain’ approach of the preceding Guidelines on Corporate Governance Practices by Public Listed Companies in Kenya, 2002 (Corporate Governance Guidelines). The new Corporate Governance Code replaces the Guidelines on Corporate Governance and listed companies will have a transition period of one year from the date of gazettement to come into compliance.

Mr. Muthaura explained that ‘the “apply or explain” approach recognizes that no single set of rules can be applicable to all types of companies. This Code allows for flexibility in the decision-making process by the Boards of listed companies with a focus on ensuring corporate decisions result in the application of the highest standards of governance with the benefit of the guidance of the standards recommended in the new Corporate Governance Code.

Where decision-making produces a lower standard than that which is prescribed in the Code, listed companies will be required to explain non-application of the recommended standards to shareholders and the Authority through relevant channels such as annual reports and Annual General Meetings’.

Mr. Muthaura further observed that the new Corporate Governance Code contained mandatory provisions which are the minimum standards that issuers must implement. These minimum standards have been incorporated in the proposed Capital Markets (Securities) (Public Offers, Listing and Disclosures) (Amendment) Regulations, 2016 and listed companies will be required to comply with those specific requirements upon enactment.

The Authority appreciates the role played by the industry-led Corporate Governance Steering Committee that formulated the Code and carried out extensive stakeholder engagement to ensure that the Code is implementable and responsive to the local conditions in the Kenyan markets. It is noted that the Code is fully aligned with the Companies Act, 2015 and will serve to complement the important provisions therein on strengthening accountability of Boards and the proper exercise of fiducial responsibilities.

The industry has also developed a Stewardship Code for Institutional Investors, which will facilitate the implementation of the new Corporate Governance Code by ensuring that institutional investors deliberately engage the boards and management of listed companies, on behalf of their ultimate beneficiaries. The Stewardship Code for Institutional Investors is awaiting enactment.

The Guidelines on the Prevention of Money Laundering and Terrorism Financing in the Capital Markets, 2016 are designed to create an oversight mechanism to detect and prevent money laundering and terrorism financing. The Guidelines are aligned to the Kenyan Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) laws, benchmarked against international best practices and the recommendations of the Financial Action Task Force (FATF), the global standard setter for AML/CFT measures.

Mr Muthaura observed, ‘We recognize the global nature of capital markets activities and the need to insulate the markets from money laundering and terrorism financing risks in line with global best practice. The Guideline requires market intermediaries to implement rigorous anti-money laundering and counter-terrorism financing (AML/CFT) measures to detect and deter illicit funds in the capital markets sector. Failure to manage these vulnerabilities exposes market intermediaries to serious reputational, operational, compliance and other risks. The issuance of the Guidelines is an affirmation of our continued vigilance to stem such risks in line with our objective of transforming Nairobi into an international financial centre and premier destination of capital’.

The Authority encourages all market intermediaries and the investing public to familiarize themselves with the rights and obligations arising under the new framework. The CMA welcomes any inquiries on the implications and intentions of the new framework and can be contacted through This email address is being protected from spambots. You need JavaScript enabled to view it. or on 2264900.



Guidelines on the Prevention of Money Laundering and Terrorism Financing in the Capital Markets

Code of Corporate Governance Practices for Issuers of Securities to the Public 2015


The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For further press information, please contact: Antony Mwangi, Head of Corporate Communications, on Email: This email address is being protected from spambots. You need JavaScript enabled to view it. or 0722825227

Notes specific to the Code of Corporate Governance Practices for Issuers of Securities to the Public

1. Executive Pay Provisions – the Code provides ‘Companies shall remunerate Board members fairly and responsibly. The Board shall establish and approve formal and transparent remuneration policies and procedures that attract and retain Board members. The remuneration policy for Board members shall clearly stipulate the elements of such remuneration including directors’ fees, attendance allowances and bonuses. The Board shall ensure that the remuneration policies are aligned with its strategies. The Board remuneration policies and procedures shall be disclosed in the annual report’.

(a) Level of remuneration – the Code provides ‘the Board shall determine the remuneration of the directors. The Board of directors shall set up an independent remuneration committee or assign a mandate to a nomination committee or such other committee executing the functions of a nomination committee, consisting mainly of independent and non-executive directors, to recommend to the Board the remuneration of the executive and non-executive directors and the structure of their compensation package. The directors’ remuneration shall be sufficient to attract and retain directors to run the company effectively and shall retroactively be approved by shareholders in an Annual General Meeting. The executive directors’ remuneration shall be structured in line with remuneration for other directors in the same industry and shall be aligned with the business strategy and long-term objectives of the company. The remuneration of the executive directors shall include an element that is linked to corporate performance, including a share option scheme, so as to ensure the maximization of the shareholders’ value. The remuneration of non-executive directors shall be competitive and in line with remuneration for other non-executive directors in the same industry. The remuneration package to directors shall be appropriately disclosed’.

2. Age limit for board members – the Code recommends an age limit of 70 years. The Code states, ‘it is desirable for board members to retire at the age of seventy years. However, members at an annual general meeting may vote to retain a Board member who is over seventy years’.

3. Director term – the Code provides, ‘the tenure of an independent board member shall not exceed a cumulative term of nine years, an independent board member may continue to serve on the board subject to re-designation as a non-independent board member. The assessment criteria of independence of directors shall also include tenure. Long tenure can impair independence. As a result, the tenure of an independent Board member is capped at nine years. The nine years can either be a consecutive service of nine years or a service of nine years with intervals’.

4. Board Diversity – the Code provides, ‘the board shall have a policy to ensure the achievement of diversity in its composition. Each board shall consider whether its size, diversity and demographics make it effective. Diversity applies to academic qualifications, technical expertise, relevant industry knowledge, experience, nationality, age, race and gender. The appointment of members shall be gender sensitive and shall not be perceived to represent a single or narrow constituency interest. Where companies establish a diversity policy, the companies shall introduce appropriate measures to ensure that the policy is implemented’.

Notes specific to the Guidelines on Prevention of Money Laundering and Terrorism Financing in the Capital Markets

1. Account opening requirements for residents and non-residents
Account opening requirements in establishing the true identity of resident customers who are natural persons include but not limited to: a birth certificate, a national identity card, a driver’s license, a passport or any other official means of identification that may be prescribed. Those of a body corporate include: evidence of registration or incorporation, the Act establishing the body corporate, a corporate resolution authorizing a person to act on behalf of the body corporate together with a copy of the latest annual return submitted in respect of the body corporate in accordance with the law or any other item as may be prescribed. For prospective non-resident customers who wish to open an account with a market intermediary, the Guidelines provides for adoption of effective identification procedures similar to those applied to Kenyan resident customers. This does not therefore imply that non-resident (foreign) customers will be required to present themselves physically when opening new accounts. It is important to note that even Kenyan resident customers are not necessarily required to present themselves physically to open accounts where they opt to open accounts and transact as non-face-to-face clients. The provisions for non-face-to-face clients apply in these cases. The specific requirements for face-to-face and those of non-face-to-face transactions verification are contained on Guidelines 5.6 and 7.2, 7.3, 7.4 & 7.5 respectively. For non-resident customers, the Guidelines indicate that such customers will be required to provide identity documents including a copy of their passport, national identity card or documentary evidence of address which shall be certified by a diplomatic mission of the country of issue, commissioner of oaths or notary public, or a senior officer of the market intermediary. For more information on account opening requirements for different classes of investors refer to: Section 45 of The Proceeds of Crime and Anti-Money Laundering Act 2009, Part IV of the Proceeds of Crime and Anti-Money Laundering Regulations, 2013 and Clause 5 of The Guidelines on Prevention of Money Laundering and Combating Financing of Terrorism in Capital Markets 2016.

2. Suspicious Transaction Reporting Obligations
All reporting institutions under the supervision of the Authority are required to report suspicious transactions reports to the Financial Reporting Centre within seven days of the date of the transaction or occurrence of the activity that is considered suspicious. In addition, the reporting institutions are required to report to the Financial Reporting Centre all cash transactions equivalent to or exceeding USD 10,000 or its equivalent in any other currency whether or not the transaction appears to be suspicious.

3. Link to Financial Reporting Center (FRC) and Proceeds of Crime and Anti-Money Laundering (POCAMLA)
All reporting institutions are required to comply with the laws, rules and Guidelines in the prevention of money laundering and combating financing of terrorism in Kenya. On enforcement, the law provides that any person, reporting institution or supervisory body who contravenes the provisions 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 three years or both fine and imprisonment. The Authority has signed an MoU with the Financial Reporting Centre aimed at governing the working relationship between the Financial Reporting Centre and the Authority as well as setting out how the respective institutions will jointly undertake anti-money laundering oversight of the reporting institutions under the Authority’s purview. The Proceeds of Crime and Anti-Money Laundering Act 2009 establishes the Anti- Money Laundering Advisory Board, the Financial Reporting Centre (FRC), the Asset Recovery Agency and the Criminal Asset Recovery Fund.

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