Nairobi, 18 March, 2016…In effort to improve the market environment for issuers of securities, the Capital Markets Authority (CMA) has announced the gazettement of amendments to the Capital Markets (Licensing Requirements)(General)(Amendment) Regulations by the Cabinet Secretary National Treasury. The amendments adopt CMA’s recommendations to reduce the fees paid by listed companies and new companies applying to list at the point of approval for issue of equity securities, corporate bond issues, capitalization or rights issue. The amendments have been effected through Legal Notice number 35 of 2016.
The Cabinet Secretary has also gazetted the Capital Markets (Derivatives Markets) Regulations through Legal Notice number 37 of 2016, which sets out the consolidated framework on the business of a derivatives exchange, clearing houses, derivatives contracts and derivatives brokers.
Speaking on the reduction of fees, CMA Acting Chief Executive Mr. Paul Muthaura explained, ‘the review of the fees, levies, and commissions was necessitated by the need to ensure financial sustainability of the capital markets sector; and raise levies collected by the Central Depository and Settlement Corporation (CDSC), given its national importance to market stability and to support continuous improvement of systems and strengthened operational oversight’.
The approval fees paid to the Authority by issuers of equity securities such as an initial public offer has been 0.15 percent of the total value of the issue. However, the newly gazetted Regulations have introduced a maximum fee cap of Kshs30 million in order to encourage large capital markets issuances. Mr. Muthaura also noted that for capitalization or rights issue, approval fees paid to the Authority by issuers is now subject to a maximum cap on amounts that an issuer will pay at any one time of Kshs30 million.
In the case of corporate bonds, approval fees have been capped at Kshs30 million. Government bonds approval fees payable at 0.075 percent of the amount raised has been capped at a maximum limit of Kshs50 million. The Regulations have also increased the transaction levy charged by CDSC from the current 0.06 percent to 0.08 percent of the value of a given transaction. The transaction fees levied by brokers at the Nairobi Securities Exchange have been reduced from 1.78 percent to 1.76 percent, by reflecting the percentage increase in the CDSC levy, implying that the cost to investors has not increased.
Mr. Muthaura observed that these developments will encourage more issuers to come to the market, while encouraging increased participation of investors in the capital market.
BACKROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY
The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest.