Capital markets channel savings into productive investment. They allow companies to raise money through shares and bonds, give governments a way to finance infrastructure, and offer investors opportunities to grow wealth. Kenya has the most developed capital market in East Africa, anchored by the Nairobi Securities Exchange (NSE) and supported by a detailed legal framework. This guide explains the key laws, regulators and rules that govern Kenya's capital markets, and what issuers, intermediaries and investors need to know.
| Institution | Role |
|---|---|
| Capital Markets Authority (CMA) | Licenses and supervises market players, approves public offers, enforces the law and protects investors |
| Nairobi Securities Exchange (NSE) | Operates the equity, debt and derivatives markets and sets listing rules |
| Central Depository and Settlement Corporation (CDSC) | Holds securities in electronic form and settles trades under the Central Depositories Act, 2000 |
| Capital Markets Tribunal | Hears appeals against decisions of the CMA |
| Investor Compensation Fund | Compensates investors who suffer loss when a licensed broker or dealer fails to meet its obligations |
The Act sets out the CMA's mandate, licensing requirements for market intermediaries, rules on public offers, prohibitions on market abuse and the CMA's enforcement powers. No person may carry on business as a stockbroker, dealer, investment adviser, fund manager, investment bank or other market intermediary without a CMA licence.
The Companies Act governs the incorporation, governance and capital of companies, including public companies that offer securities to the public. It contains rules on prospectuses, directors' duties, share capital and shareholder rights that work alongside capital markets regulations.
The Capital Markets (Public Offers, Listings and Disclosures) Regulations, 2023 replaced the earlier 2002 regulations. They set requirements for:
The Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 applies on an "apply or explain" basis. It covers board composition and independence, board committees, risk management, remuneration, shareholder rights, ethics and sustainability reporting. The CMA assesses compliance and publishes governance scorecards.
The Capital Markets (Takeovers and Mergers) Regulations, 2002 require a person who acquires effective control of a listed company (generally 25% or more of the voting shares) to make a takeover offer to the remaining shareholders on equal terms. The rules set timelines, disclosure obligations and duties of the target's board. Approval from the Competition Authority of Kenya may also be needed.
The Capital Markets (Collective Investment Schemes) Regulations, 2023 govern unit trusts, money market funds and other pooled investment vehicles. They set requirements for fund managers, trustees, custodians, investment limits, valuation and disclosure. Money market funds have grown rapidly as an investment option for Kenyan savers.
The Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations, 2013 allow the creation of income REITs and development REITs. REITs offer investors exposure to property and receive favourable tax treatment if they meet prescribed conditions.
The Capital Markets Act prohibits insider dealing, market manipulation, false trading, misleading statements and fraudulent conduct. The CMA can investigate, impose financial penalties, require disgorgement of profits, disqualify directors from serving in listed companies, suspend or revoke licences, and refer cases for criminal prosecution. Enforcement against directors of listed companies for financial misreporting has been a notable feature of recent years.
A company that offers securities to the public must do so through a CMA-approved prospectus or under an exemption. Private placements to a limited number of investors or to professional investors may qualify for exemptions, but advice should be taken before any offer.
The Investor Compensation Fund compensates investors for losses caused by a licensed broker or dealer's failure to meet its obligations, up to prescribed limits.
We advise issuers, investors, fund managers and intermediaries on public offers, private placements, licensing, collective investment schemes, takeovers and CMA investigations. Contact our capital markets team, and read our guide on Kenya's Competition Act.
Clear, practical legal counsel for people and businesses in Kenya. This article is general information, not legal advice. For advice on your situation, speak to one of our advocates.
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