The Capital Markets (Credit Rating Agencies) Regulations

These Regulations may be cited as the Capital Markets (Credit Rating Agencies) Regulations, 2023.

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Jurisdiction: Kenya
Instrument: Notice
Citation: Legal Notice 171 of 2023
Version: Undated source snapshot
Language: en

Source attribution: Source: Kenya Law

Statute overview

About this statute

These Regulations may be cited as the Capital Markets (Credit Rating Agencies) Regulations, 2023. Section 2 provides definitions used in the Regulations, including terms such as "client", "credit rating agency", "credit rating methodology", "day", "downgrade", "foreign applicant", "issuer", "private credit rating", "public credit rating", "rating", "rating committee", and "upgrade". These Regulations apply to any entity that intends to assign a rating to a security issued in Kenya or to an issuer operating in Kenya. Entities intending to operate as credit rating agencies in Kenya must apply to the Authority for approval (using the First Schedule form) and applicants must pay the application fee specified in the Second Schedule. States: "Section is a body corporate."

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Provisions of The Capital Markets (Credit Rating Agencies) Regulations

Showing 34 of 34

Part I

PRELIMINARY

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PRELIMINARY - 1. Citation

AI-assisted research summary: These Regulations may be cited as the Capital Markets (Credit Rating Agencies) Regulations, 2023.

Section 1. Citation Section These Regulations may be cited as the Capital Markets (Credit Rating Agencies) Regulations, 2023.
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PRELIMINARY - 2. Interpretation

AI-assisted research summary: Section 2 provides definitions used in the Regulations, including terms such as "client", "credit rating agency", "credit rating methodology", "day", "downgrade", "foreign applicant", "issuer", "private credit rating", "public credit rating", "rating", "rating committee", and "upgrade".

Section 2. Interpretation Section In these Regulations, unless the context otherwise requires— "client" means a person who engages the services of a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") for the purposes of a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") ; "credit rating agency" means an entity which is in, or proposes to engage in, the business of rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of securities and issuers; "credit rating methodology" means the procedure by which a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") determines credit ratings including the information that must be considered or analysed to determine a credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") and the analytical framework used to determine a credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") including, as applicable, the models, financial metrics, assumptions, criteria or other qualitative or qualitative factors to be used to determine a credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") ; "day" means calendar day excluding Saturdays, Sundays and public holidays; "downgrade" means a negative change in the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") ; "foreign applicant" means an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations; "issuer" means an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer; "private credit rating" means a credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") that is not made public and is applicable to a private offer of a security; "public credit rating" means a credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") on an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") or a security offered to the public that is made public and subject to specific requirements set out in these Regulations; "rating" means an opinion regarding a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; "rating committee" means a committee constituted by a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") to assign a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") to a security; and "upgrade" means a positive change in the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") .
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PRELIMINARY - 3. Scope

AI-assisted research summary: These Regulations apply to any entity that intends to assign a rating to a security issued in Kenya or to an issuer operating in Kenya.

Section 3. Scope Section These Regulations shall apply to any entity that intends to assign a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") to a security issued in Kenya or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") operating in Kenya.

Part II

APPROVAL OF CREDIT RATING AGENCIES

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APPROVAL OF CREDIT RATING AGENCIES - 4. Application for approval

AI-assisted research summary: Entities intending to operate as credit rating agencies in Kenya must apply to the Authority for approval (using the First Schedule form) and applicants must pay the application fee specified in the Second Schedule.

Section 4. Application for approval Section 4(1) An entity which intends to undertake business as a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") in Kenya shall apply to the Authority for approval to carry on such business in the form set out in the First Schedule. Section 4(2) An entity applying for approval under subregulation (1) shall pay the application fee specified in the Second Schedule.
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APPROVAL OF CREDIT RATING AGENCIES - 5. Eligibility of applicants

AI-assisted research summary: States: "Section is a body corporate."

Section 5. Eligibility of applicants Section is a body corporate;
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APPROVAL OF CREDIT RATING AGENCIES - 6. Recognition of foreign applicants

AI-assisted research summary: Foreign applicants who want to carry on the business of rating in Kenya must apply in writing to the Authority for a certificate of recognition and provide the documents and information listed in Section 6(2).

Section 6. Recognition of foreign applicants Section 6(1) A foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") that seeks to carry on the business of rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") in Kenya shall apply in writing to the Authority for a certificate of recognition. Section 6(2)(a) authorisation by the relevant regulator in the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") 's jurisdiction that the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") is a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") in the form of a certified copy of a valid licence or approval to carry on the business of a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; Section 6(2)(b) a letter of licence or approval status from the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") 's primary regulator; Section 6(2)(c) proof that the relevant regulator is a member of the International Organisation of Securities Commission for the purposes of information sharing and supervision; Section 6(2)(d) proof that the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") has the technical capacity and experience to carry on the business of a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; Section 6(2)(e) a code of conduct where the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") has adopted and implemented in full the International Organisation of Securities Commission Code on Credit Rating Agencies and, where there is a deviation from the Code, indicate the reason for the deviation; Section 6(2)(f) a business plan that includes resumes of the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") 's top management staff and management structure; Section 6(2)(g) a brief on the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") methodology, rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") grades and free structure; Section 6(2)(h) a sample of a standard agreement between the foreign applicant ("an entity that is incorporated or registered outside Kenya that seeks to be recognised in accordance with these Regulations;") and its clients; and Section 6(2)(k) sample letter of request for rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") ; and Section 6(2)(k)(i) sample letter of request for rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") ; and Section 6(2)(k)(ii) of the information requirements for rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") a security and an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") .
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APPROVAL OF CREDIT RATING AGENCIES - 7. Furnishing of information, clarifications and personal representations

AI-assisted research summary: The Authority may require applicants to provide additional information and may ask applicants or their authorised representatives to appear in person relating to an approval application.

Section 7. Furnishing of information, clarifications and personal representations Section 7(1) The Authority may require an applicant to furnish such further information as may be necessary for the purposes of processing the application. Section 7(2) The Authority may ask the applicant or the applicant's authorised representative to appear before the Authority in person in connection with the application for grant of approval.
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APPROVAL OF CREDIT RATING AGENCIES - 8. Grant of approval or certificate of recognition

AI-assisted research summary: The Authority must grant approval or a certificate of recognition to applicants who meet all requirements to carry on business in Kenya as a credit rating agency.

Section 8. Grant of approval or certificate of recognition Section 8(1) The Authority, on being satisfied that an applicant meets all the requirements for approval or recognition, shall grant approval or a certificate of recognition to carry on business in Kenya as a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") . Section 8(2) The approval or certificate granted under subregulation (1) shall be valid unless it is suspended or cancelled by the Authority.
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APPROVAL OF CREDIT RATING AGENCIES - 9. Refusal to grant approval or certificate of recognition

AI-assisted research summary: The Authority may refuse to grant an approval or certificate of recognition after giving the applicant a reasonable opportunity to be heard; the Authority must communicate the refusal in writing within thirty days stating the grounds; an aggrieved applicant may appeal to the Capital Markets Tribunal.

Section 9. Refusal to grant approval or certificate of recognition Section 9(1) Where the Authority determines that approval or recognition should not be granted to an applicant, the Authority may, after giving the applicant a reasonable opportunity to be heard, refuse to grant the approval or certificate of recognition. Section 9(2) The decision of the Authority under subregulation (1) shall be communicated to the applicant in writing within thirty days after the decision has been made stating the grounds for the refusal to grant the approval or certificate of recognition. Section 9(3) An applicant that is aggrieved by the decision of the Authority to refuse to grant the approval or certificate of recognition may appeal against the decision to the Capital Markets Tribunal.

Part III

GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES

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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 10. Notification of changes

AI-assisted research summary: If a credit rating agency intends to change its establishment status or constitution, it must notify the Authority in writing of the intended changes.

Section 10. Notification of changes Section Where a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") intends to change its establishment status or constitution, it shall notify the Authority in writing of the intended changes.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 11. Conflicts of interest

AI-assisted research summary: Credit rating agencies must separate their credit rating business from other businesses that may create conflicts, set and enforce conflict-minimisation policies where avoidance is claimed, and disclose in writing to the Authority justification when claiming no conflict.

Section 11. Conflicts of interest Section 11(1) An entity carrying on business as a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall operationally, legally and, where practicable, physically separate its credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") business from any other business of the entity that may resent a conflict of interest. Section 11(2) Where the other business of the entity does not present a conflict of interest with the entity's credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") business, the entity shall establish, maintain, document and enforce policies, procedures and controls for the minimisation of conflicts of interest shall arise between that other business and the credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") business. Section 11(3) An entity carrying on business as a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall disclose to the Authority in writing the justification as to why that other business of the entity does not present a conflict of interest with the credit rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") business of the entity.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 12. Agreements with clients

AI-assisted research summary: Sets out the rights and liabilities of each party to the agreement in respect of the rating.

Section 12. Agreements with clients Section the rights and liabilities of each party to the agreement in respect of the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of the security or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") ;
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 13. Rating process

AI-assisted research summary: Defines "rating" as "an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;"

Section 13. Rating process Section specify the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") process;
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 14. Monitoring of ratings

AI-assisted research summary: A credit rating agency must continuously, and at least once each year, monitor and review the rating of a security or issuer while it remains rated, unless the rating has been withdrawn.

Section 14. Monitoring of ratings Section continuously and at least once in each year, monitor and review the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of the security or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security during the tenure of the security or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") rated by the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") , unless the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") has been withdrawn;
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 15. Reviews ofrating

AI-assisted research summary: Credit rating agencies must monitor all published ratings at least once a year and must notify the Authority within 24 hours when they withdraw a rating; they may withdraw a rating if a client fails to cooperate.

Section 15. Reviews ofrating Section 15(1) A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall continuously and at least once in each year monitor all its published ratings and annual rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") reviews during the tenure of each security it has rated, unless the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") is withdrawn. Section 15(2) If a client ("a person who engages the services of a credit rating agency for the purposes of a rating;") fails to co-operate with the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") , including by failing to provide the information required to conduct a review of a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security, and, because of that failure, the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") is unable to comply with the obligation under subregulation (1) , the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") may withdraw the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") assigned to the security or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of the security. Section 15(3) The credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall notify the Authority in writing each instance where the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") withdraws a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security within twenty-four hours of the withdrawal of the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") . Section 15(4)(a) where the client ("a person who engages the services of a credit rating agency for the purposes of a rating;") or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of the security rated by the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") has been wound up, merged or amalgamated with another entity; Section 15(4)(b) where the client ("a person who engages the services of a credit rating agency for the purposes of a rating;") fails to provide adequate information to enable the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") to conduct an annual review of the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") assigned to the client ("a person who engages the services of a credit rating agency for the purposes of a rating;") or a security issued by the client ("a person who engages the services of a credit rating agency for the purposes of a rating;") ; or Section 15(4)(c) in such other circumstances as may be specified by the Authority.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 16. Procedures to prevent insider trading and market abuse by employees

AI-assisted research summary: Each credit rating agency must set up procedures and systems to detect and prevent employees from trading in the securities of the agency's clients to prevent insider trading and market abuse.

Section 16. Procedures to prevent insider trading and market abuse by employees Section Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall establish appropriate procedures and systems to detect and prevent the trading by its employees in the securities of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") 's clients in order to prevent insider trading and market abuse.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 17. Disclosure ofratingdefinitions and rationale

AI-assisted research summary: Make public the definitions and the symbol of any rating assigned to a security or issuer.

Section 17. Disclosure ofratingdefinitions and rationale Section make public the definitions of any rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") and the symbol of the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") it has assigned to a security or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security;
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 18. Submission of information to the Authority

AI-assisted research summary: The Authority may request information in writing from credit rating agencies, and credit rating agencies must provide requested information, audited accounts within four months after year-end, specified rating details (Section 18(4)), and disclose fees to the Authority.

Section 18. Submission of information to the Authority Section 18(1) The Authority may, in writing, request a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") to provide information relating to its activities, including reports relating to its activities. Section 18(2) The credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall furnish the Authority with the information requested under subregulation (1) within the period specified in the request and if no such period is specified, within a reasonable time. Section 18(3) Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall, within four months after the end of the financial year, furnish the Authority with copies of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") 's audited financial accounts. Section 18(4)(a) the rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") methodology used by the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; Section 18(4)(b) attributes and limitation of each rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") assigned to a security or issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security by the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; Section 18(4)(c) upgrades and downgrades of ratings; Section 18(4)(d) each past favourably issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security that has defaulted in the preceding five years; and Section 18(4)(e) each rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of commercial paper or corporate bond or any other rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") of a capital market instrument, as may be applicable. Section 18(5) Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall disclose to the Authority the fees it charges for its services.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 19. Compliance guidelines, directives, circular and instructions

AI-assisted research summary: Every credit rating agency must comply with guidelines, directives, circulars and instructions issued by the Authority in respect of ratings.

Section 19. Compliance guidelines, directives, circular and instructions Section Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall comply with such guidelines, directives, circulars and instructions issued by the Authority in respect of ratings.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 20. Compliance officers.

AI-assisted research summary: Credit rating agencies must appoint a compliance officer responsible for monitoring compliance; that compliance officer must immediately and independently report any non-compliance to the Authority.

Section 20. Compliance officers. Section 20(1) Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall appoint a compliance officer who shall be responsible for monitoring compliance with the Act, the Regulations and any guidelines, directives, circulars and instructions issued by the Authority in respect of ratings. Section 20(2) A compliance officer appointed under subregulation (1) shall immediately and independently report to the Authority any non-compliance by the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") with the Act, these Regulations or guidelines, directives, circulars and instructions issued by the Authority in respect of ratings.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 21. Appointment of auditors

AI-assisted research summary: A credit rating agency must notify the Authority in writing at least one month before appointing or dismissing its auditor; otherwise it must not appoint or dismiss.

Section 21. Appointment of auditors Section A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall not appoint or dismiss its auditor unless it has notified the Authority in writing at least one month before the intended appointment or dismissal.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 22. Books of account and records.

AI-assisted research summary: Keep a copy of the financial statements for each financial year.

Section 22. Books of account and records. Section a copy of the financial statements for each financial year;
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 23. Annual report

AI-assisted research summary: Annual report: the total ratings conducted in Kenya in that year.

Section 23. Annual report Section the total ratings conducted in Kenya in that year;
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 24. Auditors' report

AI-assisted research summary: Each credit rating agency must, within two months after the date of the auditor's report, take steps to rectify any deficiencies stated in that auditor's report.

Section 24. Auditors' report Section Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall, within two months after the date of the auditor's report, take steps to rectify the deficiencies, of any, stated in the auditor's report.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 25. Confidentiality

AI-assisted research summary: Each credit rating agency must keep confidential information given by a client and must not disclose it except when disclosure is required or permitted by law.

Section 25. Confidentiality Section Each credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall maintain the confidentiality of information furnished to it by a client ("a person who engages the services of a credit rating agency for the purposes of a rating;") and shall not disclose the information to any other person except where such disclosure is required or permitted by any law for the time being in force.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 26. Creditratingagency not to rate its own securities

AI-assisted research summary: A credit rating agency must not rate securities issued by its associate or subsidiary when it or its rating committee shares a chairperson, director, or employee with that associate or subsidiary.

Section 26. Creditratingagency not to rate its own securities Section A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall not assign a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") to a security issued by its associate or subsidiary if the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") or its rating committee ("a committee constituted by a credit rating agency to assign a rating to a security; and") has a chairperson, director or employee who is also the chairperson, director or employee of such associate or subsidiary.
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GENERAL OBLIGATIONS OF CREDIT RATING AGENCIES - 27. Conduct of business

AI-assisted research summary: Section 27. Conduct of business Section the Regulations are consistent with these Regulations; and

Section 27. Conduct of business Section the Regulations are consistent with these Regulations; and

Part IV

INSPECTION AND INVESTIGATION

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INSPECTION AND INVESTIGATION - 28. Inspections and investigations

AI-assisted research summary: The Authority may appoint an officer to inspect or investigate credit rating agency records for specified reasons; it may inspect rating appropriateness only if an issuer defaults; inspections under that default-case must be conducted by an officer of the Authority or an independent expert.

Section 28. Inspections and investigations Section 28(1) The Authority may appoint an officer of the Authority to inspect or investigate the books of account, records or documents of a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") for any of the reasons specified in subregulation (2) . Section 28(2)(a) to ascertain whether the books of account, records or documents of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") have been properly kept and maintained; Section 28(2)(b) to ascertain whether the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") has complied with the Act and these Regulations; Section 28(2)(c) to investigate may complaint against the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") by an investor, client ("a person who engages the services of a credit rating agency for the purposes of a rating;") or any other person on any matter having a bearing on the activities of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; or Section 28(2)(d) in the interest of the securities market or investors. Section 28(3) An inspection or investigation under subregulation (1) shall not be for the purpose of examining the appropriateness or merits of a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") assigned to a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security. Section 28(4) The Authority may inspect the appropriateness or merits of a rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") assigned to a security or an issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of a security only in the case of a default of the issuer ("an entity by which a security has been issued, guaranteed or by which the credit underlying the security has otherwise been supported and includes the corporate parent or majority-owned subsidiary of an issuer;") of the security. Section 28(5) An inspection or investigation under subregulation (4) shall be conducted by an officer of the Authority or an independent expert with relevant expertise and experience, or a combination of both.
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INSPECTION AND INVESTIGATION - 29. Notice before inspections or investigations

AI-assisted research summary: The Authority must give ten days written notice to the credit rating agency before starting an inspection or investigation under regulation 28; however, the Authority has power to direct that no notice be given if it is satisfied that doing so is in the interests of investors.

Section 29. Notice before inspections or investigations Section 29(1) Before initiating an inspection or investigation under regulation 28 , the Authority shall give ten days written notice to the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") of the intention to conduct the inspection or investigation. Section 29(2) Without prejudice to subregulation (1) , where the Authority is satisfied that, in the interests of investors, no notice should be given of the intention to conduct an inspection or investigation, the Authority may direct, in writing, that the inspection or investigation be conducted without giving notice.
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INSPECTION AND INVESTIGATION - 30. Obligations of creditratingagencies during inspections or investigations

AI-assisted research summary: Credit rating agencies and their directors, officers and employees must provide books, records and assistance during inspections or investigations; the Authority's officer or appointed independent expert may examine statements and access premises and materials.

Section 30. Obligations of creditratingagencies during inspections or investigations Section 30(1) A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") whose books of account, records or documents are being inspected or investigated, and every director, officer and employee of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") , shall furnish to the officer of the Authority or independent expert appointed by the Authority for that purpose such books of account, records or documents in the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") 's custody relating to the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") 's rating ("an opinion regarding a security or an issuer expressed in the form of standard symbols or in any other standardised manner, assigned by a credit rating agency;") activities within ten days or such reasonable period as may be specified by the officer of the Authority or independent expert. Section 30(2)(a) allow the officer or independent expert to have reasonable access to the premises occupied by the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") or director, officer and employee of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; Section 30(2)(b) extend to the officer or independent expert reasonable facilities for the examination of the books of account, records or documents of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") ; and Section 30(2)(c) provide copies of books of account, records, documents or other relevant materials which, in the opinion of the officer or independent expert, are relevant for the purpose of the inspection or investigation. Section 30(3) The officer of the Authority or independent expert, during the course of an inspection or investigation under this regulation, be entitled to examine or record the statements of the directors, officers or employees of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") in connection with the inspection or investigation. Section 30(4) Each director, officer and employee of the credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall be bound to render all assistance to the officer of the Authority or independent expert in connection with the inspection or investigation which the officer of the Authority or independent expert may reasonably require.
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INSPECTION AND INVESTIGATION - 31. Submission of reports to the Authority

AI-assisted research summary: An officer of the Authority or an independent expert who inspects a credit rating agency must submit a report to the Authority within thirty days of completing the inspection; the officer or expert may submit an interim report if directed by the Authority.

Section 31. Submission of reports to the Authority Section The officer of the Authority or independent expert who conducts an inspection or investigation of the books of account, records or documents of a credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") shall within thirty days after the completion of the inspection or investigation, submit a report thereon to the Authority: Provided that, on the direction of the Authority, the officer of the Authority or independent expert may submit an interim report on the inspection or investigation.
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INSPECTION AND INVESTIGATION - 32. Action on inspection or investigation report

AI-assisted research summary: The Authority must, after considering an inspection or investigation report, take any action appropriate under the Act and these Regulations.

Section 32. Action on inspection or investigation report Section The Authority shall, after the consideration of an inspection or investigation report, take such action as may be appropriate in accordance with the Act and these Regulations.
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INSPECTION AND INVESTIGATION - 33. Penalty

AI-assisted research summary: A credit rating agency that contravenes any provision of these Regulations will, upon conviction, be liable to the penalties prescribed under the Act.

Section 33. Penalty Section A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") that contravenes any of the provisions of these Regulations shall be liable, on conviction, to the penalties prescribed under the Act.
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INSPECTION AND INVESTIGATION - 34. Transitions and savings

AI-assisted research summary: Credit rating agencies already approved or recognised before these Regulations came into force are deemed approved under these Regulations; those agencies must fully comply with these Regulations within six months of their coming into operation.

Section 34. Transitions and savings Section 34(1) A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") that had been approved or recognised by the Authority before the coming into operation of these Regulations shall be deemed to have been approved or recognised in accordance with these Regulations. Section 34(2) A credit rating agency ("an entity which is in, or proposes to engage in, the business of rating of securities and issuers;") that had been approved or recognised by the Authority before the coming into operation of these Regulations shall, within six months after the coming into operation of these Regulations, comply fully with these Regulations.

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