The Capital Market Authority came to being in 1989 as an Act of Parliament. The independent agency was established under the National Treasury and Planning Cap 485A and inaugurated in 1990.
It is a regulatory body whose primary role is to monitor, supervise and license market activities, including settlement system, central depository, and stock exchange. CMA is crucial for its massive role in facilitating the allocation and mobilization of resources for financing various long-term investments.
What is the Role of Capital Markets Authority?
CMA provides regulation by offering strategic guidelines to the financial services on the number of resources allocated to different sectors. This includes securities related to the government in different ranges, equities, and government bonds. The functions of this regulatory authority include:
· Supervising and licensing capital markets and their intermediaries in the country
It grants licenses to brokers who provide capital market products and services to issuers and investors. It also licenses the financial rating agencies and defines and regulates their work process.
· Ensure the licensed firms and persons conduct themselves properly
Providing legal control and sanctioning those who violate the rules and initiating legal steps against those who commit fraud and other trading crimes.
· Controlling and regulating the issuance of the capital market products such as bonds and shares
It sets up regulatory frameworks for listing and issuing financial markets and approves their trading on stock markets.
· Enhancing the public awareness and investor education
It provides investors with enough knowledge regarding the implications of various investment decisions for a more realistic and sound investment approach.
· Protecting the interests of various investors
Through offering education and information to investors helps enhance investor protection.
Strategic Objectives of CMA
Promotes Institutions and Research on New Products to ensure the Development of Capital Markets
The core strategic objective of CMA is to ensure the increasing efficiency, competitiveness, and financially reasonable to facilitate innovations of a wide range of capital market products for diverse investors and issuers. The development of the capital market is beneficial not only to the private investors but the whole economy as well. A developed capital market provides access to long-term financing and offers diversified investment opportunities.
Provide Investor Protection
It is common for some individuals and institutions to indulge in unfair and fraudulent practices when dealing with financial instruments as they seek to achieve fast profits. This behavior is negative, and it affects both investors and markets both directly and indirectly.
The CMA comes up with regulations to protect investors through improved functions of the capital market and controlled licensing. CMA develops and implements rules and decisions that are necessary for the efficiency, transparency, and boosting of confidence for investors in the market.
How Does CMA Regulate the Capital Markets in Kenya?
Through its board of directors, the management, and the chief executive’s support, the capital market authority carries out its role as directed by the constitution of Kenya. Like other constitutional bodies, CMA uses a regulatory framework to conduct its regulation activities built within the confines of the constitution. Its regulatory framework consists of:
- Capital market act
- 2000 central depositories act
Rules and Regulation
- Collective Investment Schemes Capital Market Regulations 2001
- Public Offers, Listing, and Disclosures Capital Market Regulation and Securities, 2002
- Licensing Requirements Capital Market Regulations 2002
- Takeovers and Mergers Capital Market Regulation 2002
- Foreign Investors Capital Market Regulation 2002
- Tribunal Capital Market Rules 2002
- Assets-backed Securities Capital Market Regulation 2007
- Registered Venture Capital Market Regulation 2011
- Intermediaries and Conducting Business Capital Market Regulations
- Corporate Governance and Intermediaries Capital Market Regulation 2011
- Demutualization of the Nairobi Securities Exchange Limited Capital Market Regulation 2012
- Future Exchange Licensing Requirements Capital Market Regulation 2013
- Collective Investment Schemes and Real Estate Investment Capital Market Regulations 2013
- Guidelines on Corporate Governance Practices by Public Listed Companies
- Guidelines on the Approval and Registration of Crediting Agencies
- Guidelines on Financial Requirements for Market Intermediaries
Composition of the Capital Market Authority
- President appoints a chairman based on the recommendation of the minister
- The minister appoints six other members
- A Permanent Secretary to the Treasury
- The Governor or his appointed representative of the Central Bank of Kenya
- The Attorney General
- The Chief Executive of the Authority
The Capital Market Authority governs, regulates, and sets guidelines for the capital market operations. It’s tasked with the continuity and development of all market aspects.