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PART I – PRELIMINARY
| 1. |
Short title
This Act may be cited as the Capital Markets Authority Act.
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| 1. |
Short title
This Act may be cited as the Capital Markets Act.
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| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” in relation to a dealer, includes a person who is, or has at any time been, a banker of the dealer;
“Authority” means the Capital Markets Authority established by section 5;
“broker”means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“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;
“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealer’s representative” means a person, by whatever name described, in the direct employment of or acting for, or by arrangement with a dealer, who performs for the dealer any of the functions of a dealer (other than work ordinarily performed by accountants, clerks or cashiers) whether his remuneration is by way of salary wages, commission or otherwise; and includes any director or officer of a body corporate who performs for the body corporate any of those functions;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
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| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
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“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“investment adviser” means a person who—
| (a) |
carries on business of advising others concerning securities;
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| (b) |
issues or promulgates analyses or reports concerning securities;
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| (c) |
pursuant to a contract or arrangement with a client undertakes on behalf of the client the management of a portfolio of securities for the purpose of investment;
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“licence” means—
| (a) |
a broker's or a dealer's licence;
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| (b) |
an investment adviser's licence; or
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| (c) |
a representative's licence; or
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| (d) |
any other licence granted under this Act;
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“licensed person” means a person or body corporate holding a licence under this Act;
“member” means a person who is recognized as a member of a securities exchange;
“mutual fund” means any person who is, or holds himself out as being engaged, or proposes to be engaged, in the business of investing, reinvesting, or trading in securities and which is offering for sale or has outstanding any redeemable shares of which he is the issuer;
“quotation”in relation to securities and in relation to a securities exchange, includes the displaying or providing, on a securities 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 stock market, those prices or that consideration;
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| (b) |
in a case where offers or invitations are made on that stock 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
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| (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;
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“representative”means a representative of any person licensed by the Authority;
“securities” mean—
| (a) |
debentures, stocks or bonds issued or proposed to be issued by a government;
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| (b) |
debentures, stocks, shares, bonds or notes issued or proposed to be issued by a body corporate;
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| (c) |
any right, warrant, option or futures in respect of any debenture, stock, shares, bonds, notes or in respect of commodities;
| (d) |
any instruments commonly known as securities, but does not include—
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| (ii) |
promissory notes; or
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| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act (9 of 1989);
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“securities exchange” means a stock exchange or an approved securities organization;
“share” means a share in the share capital of a body corporate and includes stock except where a distinction between stock and shares is express or implied;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
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| (b) |
offers or invitations are regularly made, 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 securities; or
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| (c) |
information is regularly provided concerning the prices 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 securities;
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“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means a unit trust registered or required to be registered under the Unit Trusts Act.
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| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee;
“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;
“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 which is incorporated or organized under the laws of Kenya which—
| (a) |
collects and pools funds from the public or a section of the public for the purpose of investment;
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| (b) |
is managed by or on behalf of the scheme by the promoter of the scheme;
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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;
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| (ii) |
an arrangement where each of the holders of the shares is a body corporate in the same group as the promoter;
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| (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;
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| (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);
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| (v) |
contracts of insurance;
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| (vi) |
occupational pension schemes;
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“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
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| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
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“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital fund or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public to subscribe for the purchase of securities;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
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| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
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| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
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| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
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| (5) |
such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
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| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
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| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
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| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
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| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
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| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
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| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
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| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
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“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of that company, which shares the company ensures can be sold by the shareholders on a securities exchange at a price related to the net assets of the scheme;
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“member” means a person who is recognized as a member of a securities exchange;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
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| (b) |
the investments of the participants are represented by shares of that body corporate;
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| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
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“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, includes the displaying or providing, on a securities 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 stock market, those prices or that consideration;
|
| (b) |
in a case where offers or invitations are made on that stock 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
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| (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;
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“registered venture capital fund” 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 eighty per cent of the funds so invested consist of equity or quasi-equity investment in eligible enterprises;
“representative” means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical 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) |
debentures or bonds issued or proposed to be issued by a government;
|
| (b) |
debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate;
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| (c) |
any right, warrant, option or futures in respect of any debenture, shares, bonds, notes or in respect of commodities;
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| (d) |
any unit, interest or share offered under a collective investment scheme; or
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| (e) |
any instruments commonly known as securities, but does not include—
| (ii) |
promissory notes; or
|
| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap. 488);
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|
“securities exchange” means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“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;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
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| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.
|
| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee;
“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;
“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 which is incorporated or organized under the laws of 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;
|
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) |
occupational pension schemes;
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“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
|
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital fund or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public to subscribe for the purchase of securities;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
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“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“member” means a person who is recognized as a member of a securities exchange;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
|
“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, includes the displaying or providing, on a securities 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 stock market, those prices or that consideration;
|
| (b) |
in a case where offers or invitations are made on that stock 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;
|
“registered venture capital fund” 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 eighty per cent of the funds so invested consist of equity or quasi-equity investment in eligible enterprises;
“representative” means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical 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) |
debentures or bonds issued or proposed to be issued by a government;
|
| (b) |
debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate;
|
| (c) |
any right, warrant, option or futures in respect of any debenture, shares, bonds, notes or in respect of commodities;
|
| (d) |
any unit, interest or share offered under a collective investment scheme; or
|
| (e) |
any instruments commonly known as securities, but does not include—
| (ii) |
promissory notes; or
|
| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap. 488);
|
|
“securities exchange” means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“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;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.
|
| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee;
“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 which is incorporated or organized under the laws of 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;
|
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) |
occupational pension schemes;
|
“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
|
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
|
“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“member” means a person who is recognized as a member of a securities exchange;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
|
“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, includes the displaying or providing, on a securities 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 stock market, those prices or that consideration;
|
| (b) |
in a case where offers or invitations are made on that stock 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;
“representative” means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical 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) |
debentures or bonds issued or proposed to be issued by a government;
|
| (b) |
debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate;
|
| (c) |
any right, warrant, option or futures in respect of any debenture, shares, bonds, notes or in respect of commodities;
|
| (d) |
any unit, interest or share offered under a collective investment scheme or other similar vehicles, whether established in Kenya or not; or
|
| (e) |
any instruments commonly known as securities, but does not include—
| (ii) |
promissory notes; or
|
| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap. 488);
|
|
“securities exchange” means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“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;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.
|
| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee;
“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 which is incorporated or organized under the laws of 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;
|
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) |
occupational pension schemes;
|
“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
|
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
|
“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
|
“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, includes the displaying or providing, on a securities 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 stock market, those prices or that consideration;
|
| (b) |
in a case where offers or invitations are made on that stock 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;
|
“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;
“representative” means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical 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) |
debentures or bonds issued or proposed to be issued by a government;
|
| (b) |
debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate;
|
| (c) |
any right, warrant, option or futures in respect of any debenture, shares, bonds, notes or in respect of commodities;
|
| (d) |
any unit, interest or share offered under a collective investment scheme or other similar vehicles, whether established in Kenya or not; or
|
| (e) |
any instruments commonly known as securities, but does not include—
| (ii) |
promissory notes; or
|
| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap. 488);
|
|
“securities exchange” means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“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;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“trading participant” means a licensee of the Authority with rights to trade at an approved securities exchange;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.
|
| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee;
“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 which is incorporated or organized under the laws of 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;
|
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) |
occupational pension schemes;
|
“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
|
“derivatives dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting, or retailing securities derivatives as an agent for investors or on his own account, with the intention of selling them to the public;
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
“futures contract” means a contract for the acquisition or disposal of securities or other instruments, such as a commodity or a financial instrument, under which delivery is to be made at a future date and at a price agreed upon when the contract is made and shall include a reference to a date and a price determined in accordance with the terms of the contract;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
|
“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“key personnel” means a person who manages or controls the activities of a licensed or a regulated person and includes—
| (a) |
the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor, or any manager; and
|
| (b) |
any person who holds a position or discharges responsibilities of any person referred to in paragraph (a);
|
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
|
“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 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, includes the displaying or providing, on a securities 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, those prices or that consideration;
|
| (b) |
in a case where offers or invitations are made on that securities 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;
|
“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;
“representative” means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical 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) |
debentures or bonds issued or proposed to be issued by a government;
|
| (b) |
debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate;
|
| (c) |
derivatives including futures contracts and options contracts on—
| (iii) |
interest or other rates;
|
|
| (d) |
any unit, interest or share offered under a collective investment scheme or other similar vehicles, whether established in Kenya or not; or
|
| (e) |
any instruments commonly known as securities, but does not include—
| (ii) |
promissory notes; or
|
| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap. 488);
|
|
“securities exchange” means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement 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;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“trading participant” means a licensee of the Authority with rights to trade at an approved securities exchange;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.
|
| 2. |
Interpretation
In this Act, unless the context otherwise requires—
“agent” means any person appointed in writing by a licensee, to perform any of the functions ordinarily performed by the licensee on behalf of the licensee;
“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 which is incorporated or organized under the laws of 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;
|
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) |
occupational pension schemes;
|
“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities;
|
“derivatives dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting, or retailing securities derivatives as an agent for investors or on his own account, with the intention of selling them to the public;
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
“futures contract” means a contract for the acquisition or disposal of securities or other instruments, such as a commodity or a financial instrument, under which delivery is to be made at a future date and at a price agreed upon when the contract is made and shall include a reference to a date and a price determined in accordance with the terms of the contract;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, by rules or regulations, determine to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
|
“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“key personnel” means a person who manages or controls the activities of a licensed or a regulated person and includes—
| (a) |
the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor, or any manager; and
|
| (b) |
any person who holds a position or discharges responsibilities of any person referred to in paragraph (a);
|
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
|
“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 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, includes the displaying or providing, on a securities 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, those prices or that consideration;
|
| (b) |
in a case where offers or invitations are made on that securities 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;
“representative” means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical 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) |
debentures or bonds issued or proposed to be issued by a government;
|
| (b) |
debentures, shares, bonds, commercial paper, or notes issued or proposed to be issued by a body corporate;
|
| (c) |
derivatives including futures contracts and options contracts on—
| (iii) |
interest or other rates;
|
|
| (d) |
any unit, interest or share offered under a collective investment scheme or other similar vehicles, whether established in Kenya or not; or
|
| (e) |
any instruments commonly known as securities, but does not include—
| (ii) |
promissory notes; or
|
| (iii) |
certificates of deposits issued by a bank or financial institution licensed under the Banking Act, 1989 (Cap. 488);
|
|
“securities exchange” means a market, exchange, securities organisation or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement 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;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“trading participant” means a licensee of the Authority with rights to trade at an approved securities exchange;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom. [ Act No. 3 of 2000, s. 4, Act No. 2 of 2002, Sch., Act No. 8 of 2008, s. 47, Act No. 10 of 2010, s. 45, Act No. 37 of 2011, s. 2, Act No. 4 of 2012, s. 32.]
|
| 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;
|
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;
|
“company” means a company formed and registered under the Companies Act ( Cap. 486);
“Compensation Fund” means the Investor Compensation Fund established by section 18;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities except exchange-traded derivatives contracts whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities except in exchange-traded derivatives contracts; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities except in exchange-traded derivatives contracts;
|
"derivatives exchange"means a securities exchange which has been granted a license to list exchange-traded derivative contracts by the Authority under the Act or approved for such purposes and in accordance with the regulations issued thereunder;
"derivatives market”means a place at which, or a facility, whether electronic or otherwise, by means of which offers or invitations to sell, purchase or exchange-traded derivative contracts are regularly made on a centralised 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-traded derivative contracts, whether through that place, facility or otherwise, but does not include—
| (a) |
the office or facilities of a derivatives broker; or
|
| (b) |
the facilities of a clearinghouse;
|
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“exchange-traded derivatives contract”means an agreement to buy or sell a particular security or other financial instrument or commodity for delivery or settlement in the future, at a price that is agreed upon when the contract is made, which obligates each party to the contract to fulfill the contract at the specified price and that may be settled by delivery, cash or offset at a derivatives exchange duly licensed by the Authority;
“exchange-traded derivatives contract”means standardized type of securities or financial instruments which derive their value from the value of underlying assets, indices, or interest rates that are transacted on a licensed derivatives exchange;
"expert”in respect of a matter or an opinion, means a person whose profession, occupation, religious standing, expertise or reputation gives authority to a statement made by that person in relation to that matter or opinion;
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
"futures broker"means a body corporate admitted into the membership of a derivatives exchange and duly licensed by the Authority to engage in the business of trading in exchange-traded derivatives contracts as an agent for investors in return for a commission and on its own account;
."futures member”means a person admitted to the membership of a futures exchange in accordance with the Regulations made under the Act and rules of that derivatives exchange but does not denote a shareholder or an equity holder of that derivatives exchange;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public and includes a short-form prospectus, a shelf prospectus, information notice, an offering memorandum in respect of asset backed securities and a supplementary prospectus;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, prescribe to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
|
“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“key personnel” means a person who manages or controls the activities of a licensed or a regulated person and includes—
| (a) |
the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor, or any manager; and
|
| (b) |
any person who holds a position or discharges responsibilities of any person referred to in paragraph (a);
|
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);.
|
“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 otherwise than at an approved securities except in exchange-traded derivatives contracts 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, 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 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;
|
| (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;
"sophisticated investor"means—
| (a) |
a person who is licensed under this Act;
|
| (b) |
an authorized scheme or a collective investment scheme;
|
| (c) |
a bank, a subsidiary of a bank, insurance company, co-operative society, statutory fund, pension or retirement fund; or
|
| (d) |
an individual, company, partnership, association or a trustee on behalf of a trust which, either alone or with any associates on a joint account subscribes for securities with an issue price as the Authority may prescribe from time to time;
|
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“trading participant” means a licensed person with rights to trade at an approved securities exchange;
"trustee" in relation to real estate investment trust or a collective investment scheme, means a person appointed under a trust deed of a real estate investment trust or a collective investment scheme, as the case may be, as its trustee.
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom. [ Act No. 3 of 2000, s. 4, Act No. 2 of 2002, Sch., Act No. 8 of 2008, s. 47, Act No. 10 of 2010, s. 45, Act No. 37 of 2011, s. 2, Act No. 4 of 2012, s. 32, Act No. 48 of 2013, s. 2.]
|
| 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;
|
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;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities except exchange-traded derivatives contracts whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities except in exchange-traded derivatives contracts; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities except in exchange-traded derivatives contracts;
|
"derivatives exchange" means a securities exchange which has been granted a license to list exchange-traded derivative contracts by the Authority under the Act or approved for such purposes and in accordance with the regulations issued thereunder;
"derivatives market” means a place at which, or a facility, whether electronic or otherwise, by means of which offers or invitations to sell, purchase or exchange-traded derivative contracts are regularly made on a centralised 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-traded derivative contracts, whether through that place, facility or otherwise, but does not include—
| (a) |
the office or facilities of a derivatives broker; or
|
| (b) |
the facilities of a clearinghouse;
|
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“exchange-traded derivatives contract” means an agreement to buy or sell a particular security or other financial instrument or commodity for delivery or settlement in the future, at a price that is agreed upon when the contract is made, which obligates each party to the contract to fulfill the contract at the specified price and that may be settled by delivery, cash or offset at a derivatives exchange duly licensed by the Authority;
“exchange-traded derivatives contract” means standardized type of securities or financial instruments which derive their value from the value of underlying assets, indices, or interest rates that are transacted on a licensed derivatives exchange;
"expert” in respect of a matter or an opinion, means a person whose profession, occupation, religious standing, expertise or reputation gives authority to a statement made by that person in relation to that matter or opinion;
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
"futures broker" means a body corporate admitted into the membership of a derivatives exchange and duly licensed by the Authority to engage in the business of trading in exchange-traded derivatives contracts as an agent for investors in return for a commission and on its own account;
"futures member”means a person admitted to the membership of a futures exchange in accordance with the Regulations made under the Act and rules of that derivatives exchange but does not denote a shareholder or an equity holder of that derivatives exchange;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public and includes a short-form prospectus, a shelf prospectus, information notice, an offering memorandum in respect of asset backed securities and a supplementary prospectus;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, prescribe to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
|
|
|
“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“key personnel” means a person who manages or controls the activities of a licensed or a regulated person and includes—
| (a) |
the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor, or any manager; and
|
| (b) |
any person who holds a position or discharges responsibilities of any person referred to in paragraph (a);
|
“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);
|
“online forex broker” means a body corporate duly licensed by the Authority to engage in the business of online trading in foreign exchange as an agent of investors in return for a commission and on its own account;
“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 otherwise than at an approved securities except in exchange-traded derivatives contracts 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, 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 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;
|
| (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;
"sophisticated investor" means—
| (a) |
a person who is licensed under this Act;
|
| (b) |
an authorized scheme or a collective investment scheme;
|
| (c) |
a bank, a subsidiary of a bank, insurance company, co-operative society, statutory fund, pension or retirement fund; or
|
| (d) |
an individual, company, partnership, association or a trustee on behalf of a trust which, either alone or with any associates on a joint account subscribes for securities with an issue price as the Authority may prescribe from time to time;
|
“spot commodity trading” means the purchase or sale of a commodity at its current market or spot price, where it is intended that such transaction results in the physical delivery of the commodity, and "spot commodity contract" shall be construed accordingly;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
|
“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“trading participant” means a licensed person with rights to trade at an approved securities exchange;
"trustee" in relation to real estate investment trust or a collective investment scheme, means a person appointed under a trust deed of a real estate investment trust or a collective investment scheme, as the case may be, as its trustee;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom. [ Act No. 3 of 2000, s. 4, Act No. 2 of 2002, Sch., Act No. 8 of 2008, s. 47, Act No. 10 of 2010, s. 45, Act No. 37 of 2011, s. 2, Act No. 4 of 2012, s. 32, Act No. 48 of 2013, s. 2, Act No. 38 of 2016, ss. 48 & 68.]
|
| 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;
|
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;
“credit rating agency” means an organisation which provides the service of evaluating the relative creditworthiness of issuers of securities and assigns ratings to such securities;
“dealer” means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities except exchange-traded derivatives contracts whether or not he carries on any other business;
“dealing in securities” means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—
| (a) |
any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities except in exchange-traded derivatives contracts; or
|
| (b) |
any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities except in exchange-traded derivatives contracts;
|
"derivatives exchange" means a securities exchange which has been granted a license to list exchange-traded derivative contracts by the Authority under the Act or approved for such purposes and in accordance with the regulations issued thereunder;
"derivatives market” means a place at which, or a facility, whether electronic or otherwise, by means of which offers or invitations to sell, purchase or exchange-traded derivative contracts are regularly made on a centralised 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-traded derivative contracts, whether through that place, facility or otherwise, but does not include—
| (a) |
the office or facilities of a derivatives broker; or
|
| (b) |
the facilities of a clearinghouse;
|
“director” has the meaning assigned to it in the Companies Act ( Cap. 486);
“exchange-traded derivatives contract” means standardized type of securities or financial instruments which derive their value from the value of underlying assets, indices, or interest rates that are transacted on a licensed derivatives exchange;
"expert” in respect of a matter or an opinion, means a person whose profession, occupation, religious standing, expertise or reputation gives authority to a statement made by that person in relation to that matter or opinion;
“financial instrument” includes securities, mortgage contracts, property contracts, pension contracts, insurance contracts, leasehold contracts, certificates of interest and any variations or derivatives thereof;
“fund manager” means a manager of a collective investment scheme, registered venture capital company or an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the Authority from time to time;
"futures broker" means a body corporate admitted into the membership of a derivatives exchange and duly licensed by the Authority to engage in the business of trading in exchange-traded derivatives contracts as an agent for investors in return for a commission and on its own account;
"futures member”means a person admitted to the membership of a futures exchange in accordance with the Regulations made under the Act and rules of that derivatives exchange but does not denote a shareholder or an equity holder of that derivatives exchange;
“incorporation documents” means the principal documents governing the formation of a collective scheme and includes the trust deed, memorandum and the articles of association and all material agreements as the case may be;
“information memorandum” means any prospectus or document, notice, circular, advertisement or other invitation, in print or electronic form, containing information on a company or other legal person authorized to issue securities or a collective investment scheme calculated to invite offers from the public or a section of the public and includes a short-form prospectus, a shelf prospectus, information notice, an offering memorandum in respect of asset backed securities and a supplementary prospectus;
“insider” means any person who is or was connected with a company, or is deemed to have been connected with a company and who is reasonably expected to have access, by virtue of such connection, to unpublished information which, if made generally available, would be likely to materially affect the price or value of the securities of the company, or who has received or has had access to such unpublished information;
“investment adviser” means any person (other than a bona fide officer, director, trustee, member of an advisory board or employee of a company as such) who, for remuneration—
| (1) |
carries on the business of advising others concerning securities; or
|
| (2) |
as part of a regular business, issues or promulgates analyses or reports concerning securities; or
|
| (3) |
pursuant to a contract or arrangement with a client, undertakes on behalf of the client (whether on a discretionary authority granted by the client or otherwise), the management of a portfolio of securities for the purpose of investment, where the total portfolio does not exceed the amount prescribed by the Authority from time to time; or
|
| (4) |
deals with long term financing equity and debt and acts as adviser or under writer in relation to a public issue of securities; or
|
| (5) |
such other persons as the Authority may, prescribe to be within the intent of this definition: but the expression does not include—
| (b) |
a company or association registered under Part III of the Insurance Act (Cap. 487);
|
| (c) |
an advocate, accountant or certified public secretary in practice whose carrying on of that business is solely incidental to the practice of his profession;
|
| (d) |
a trust corporation within the meaning of the Trustee Act (Cap. 167);
|
| (e) |
a dealer or his employee whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
|
| (f) |
a person who is the proprietor of a newspaper and holder of a permit issued under the Books and Newspapers Act (Cap. 111), where—
| (i) |
insofar as the newspaper is distributed generally to the public, it is distributed only to subscribers to, and purchasers of, the newspaper for value;
|
| (ii) |
the advice is given or the analyses or reports are issued or promulgated only through that newspaper;
|
| (iii) |
that person receives no commission or other consideration for giving the advice or for issuing or promulgating the analyses or reports;
|
| (iv) |
the advice is given and the analyses and reports are issued or promulgated solely as incidental to the conduct of that person’s business as a newspaper proprietor;
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|
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“investment bank” means a non-deposit taking institution licensed by the Authority to advise on offers of securities to the public or a section of the public, takeovers, mergers, acquisitions, corporate restructuring involving companies listed or quoted on a securities exchange, privatisation of companies listed or to be listed on a securities exchange or underwriting of securities issued or to be issued to the public and to engage in the business of a stockbroker or dealer;
“investment company” means a collective investment scheme organised as a limited liability company under the Companies Act ( Cap. 486) in which the rights of the participants are represented by shares of the company;
“key personnel” means a person who manages or controls the activities of a licensed or a regulated person and includes—
| (a) |
the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor, or any manager of licensed persons and chief financial officers and Board of Directors of issuers of securities; and
|
| (b) |
any person who holds a position or discharges responsibilities of any person referred to in paragraph (a);
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“licensed person” means a person or body corporate who has been issued with a licence or approved by the Authority;
“mutual fund” means a collective investment scheme set up as a body corporate under section 30(5) whereby—
| (a) |
the assets of the scheme belong beneficially to and are managed by or on behalf of the body corporate;
|
| (b) |
the investments of the participants are represented by shares of that body corporate;
|
| (c) |
the body corporate is authorised by its articles of association to redeem or repurchase its shares otherwise than in accordance with section 68 of the Companies Act (Cap. 486);
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“online forex broker” means a body corporate duly licensed by the Authority to engage in the business of online trading in foreign exchange as an agent of investors in return for a commission and on its own account;
“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 otherwise than at an approved securities except in exchange-traded derivatives contracts 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, 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;
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“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 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");
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| (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;
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| (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;
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| (g) |
futures in respect of securities or other assets or property;
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| (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;
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| (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;
|
| (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;
|
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“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;
"sophisticated investor" means—
| (a) |
a person who is licensed under this Act;
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| (b) |
an authorized scheme or a collective investment scheme;
|
| (c) |
a bank, a subsidiary of a bank, insurance company, co-operative society, statutory fund, pension or retirement fund; or
|
| (d) |
an individual, company, partnership, association or a trustee on behalf of a trust which, either alone or with any associates on a joint account subscribes for securities with an issue price as the Authority may prescribe from time to time;
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“spot commodity trading” means the purchase or sale of a commodity at its current market or spot price, where it is intended that such transaction results in the physical delivery of the commodity, and "spot commodity contract" shall be construed accordingly;
“stockbroker” means a person who carries on the business of buying or selling of securities as an agent for investors in return for a commission;
“stockbroking agent” means a person, not being a salaried employee of a stockbroker, who, in consideration of a commission, solicits or procures stockbroking business on behalf of a stockbroker;
“stock exchange” means a market, exchange or other place at which securities are offered for sale, purchase or exchange, including any clearing, settlement or transfer services connected therewith;
“stock market” means a market, or other place at which, or a facility by means of which—
| (a) |
offers to sell, purchase or exchange securities are regularly made or accepted;
|
| (b) |
offers or invitations are regularly made, 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 securities; or
|
| (c) |
information is regularly provided concerning the prices 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 securities;
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“substantial shareholder” means any person who is the beneficial owner of, or is in a position to exert control over, not less than fifteen per cent of the shares of a body corporate;
“trading participant” means a licensed person with rights to trade at an approved securities exchange;
"trustee" in relation to real estate investment trust or a collective investment scheme, means a person appointed under a trust deed of a real estate investment trust or a collective investment scheme, as the case may be, as its trustee;
“underwriting” means the purchase or commitment to purchase or distribute by dealers or other persons of issue or offer of securities for immediate or prompt public distribution by or through them;
“unit trust” means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (unit of investment) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom. [ Act No. 3 of 2000, s. 4, Act No. 2 of 2002, Sch., Act No. 8 of 2008, s. 47, Act No. 10 of 2010, s. 45, Act No. 37 of 2011, s. 2, Act No. 4 of 2012, s. 32, Act No. 48 of 2013, s. 2, Act No. 38 of 2016, ss. 48 & 68, Act No. 15 of 2018, s. 2.]
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| 3. |
Meaning of the term “associated person”
| (1) |
For the purpose of this Act, a reference to a person associated with another person shall be construed as a reference to—
| (a) |
where the other person is a body corporate—
| (i) |
a director or secretary of the body corporate; |
| (ii) |
a body corporate that is related to the other person; or |
| (iii) |
a director or secretary of such related body corporate; |
|
| (b) |
where the matter to which the reference relates in the extent of a power to exercise, or to control the exercise of, the voting power attached to voting shares in a body corporate, a person with whom the other person has, or proposes to enter into, an understanding or undertaking, whether express or implied—
| (i) |
by reason of which either of those persons may exercise, directly or indirectly control the exercise of, or substantially influence the exercise of, any voting power attached to a share in the body corporate; |
| (ii) |
with a view to controlling or influencing the composition of the board of directors, or the conduct of affairs, of the body corporate; or |
| (iii) |
under which either of those persons may acquire from the other of them shares in the body corporate or may be required to dispose of such shares in accordance with the directions of the other of them; |
|
| (c) |
a person in concert with whom the other person is acting or proposes to act, in relation to the matter to which the reference relates;
|
| (d) |
where the matter to which the reference relates is a matter, other than the extent of a power to exercise or control the exercise of, the voting power attached to voting shares in a body corporate—
| (i) |
subject to subsection (2), a person who is a director of a body corporate that carries on a business of dealing in securities and of which the other person is also a director; |
| (ii) |
subject to subsection (2), a person who is a director of a body corporate of which the other person is director, not being a body corporate that carries on a business of dealing in securities; or |
| (iii) |
a trustee of a trust in relation to which the other person benefits or is capable of benefiting otherwise than by reason of transactions entered into in the ordinary course of business in connection with the lending of money; |
|
| (e) |
a person with whom the other person is, by virtue of any law, to be regarded as associated in respect of the matter to which the reference relates;
|
| (f) |
a person with whom the other person is, or proposes to become, associated, whether formally or informally, in any other way in respect of the matter to which the reference relates; or
|
| (g) |
where the other person has entered into, or proposes to enter into, a transaction, or has done, or proposes to do, any other act or thing, with a view to becoming associated with the person mentioned in paragraph (a), (b), (c), (d), (e), or (f), that last mentioned person.
|
|
| (2) |
Where it is alleged that a person referred to in subsection (1)(d)(i) and (ii) was associated with another person at a particular time, that person shall be deemed not to have been so associated in relation to the subject matter unless the person alleging the association proves that the first mentioned person at that time knew or ought reasonably to have known the material particulars of that matter.
|
| (3) |
A person shall not be deemed to be associated with another person by virtue of subsection (1)(b), (c), (e) or (f) solely by reason of the fact that one of those persons furnishes advice to, or acts on behalf of, the other person in the proper performance of the functions attaching to his professional capacity or to his business relationship with the other person.
|
|
| 3. |
Meaning of the term associate
For the purpose of this Act—
"associate", in relation to—
| (a) |
| (i) |
a spouse, son, adopted son, step-son, son-in-law, daughter, adopted daughter, step-daughter, daughter-in-law, father, step-father, father-in-law, mother, step-mother, mother-in-law, brother, step-brother, brother-in-law, sister or step-sister, sister-in-law, grandchild or spouse of a grandchild; of that individual; |
| (ii) |
any company in which that individual is a director or secretary, has a controlling interest or is the controlling interest; |
| (iii) |
any company in which that individual, or any of the persons specified in subparagraph (i), has control of twenty per cent or more of the voting power on appointments to the board of directors or entitlement to dividends in the company, whether such control is exercised individually or jointly; |
| (iv) |
any employee of that individual; or |
|
| (b) |
a company, means another company in which the first mentioned company has control of not less than twenty percent of the voting power in that company,
|
and a reference in this Act, regulations, rules, guidelines or notices issued thereunder, to an associated person or associated company shall be construed accordingly.
|
| 4. |
Definition of “interest in securities”
| (1) |
Where any property held in trust consists of or includes securities in which a person knows, or has reasonable grounds for believing, that he has an interest, he shall be deemed to have an interest in those securities.
|
| (2) |
A person shall be deemed to have an interest in a security where a body corporate has an interest in a security and—
| (a) |
the body corporate is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with directions, instructions or wishes of that person in relation to that security;
|
| (b) |
that person has a controlling interest in the body corporate; or
|
| (c) |
that person is, or the associates of that person or that person and his associates are, entitled to exercise or control the exercise of not less 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;
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