The Capital Markets (Asset-Backed Securities) Regulations

AI-assisted research summary: These Regulations may be cited as the Capital Markets (Asset-Backed Securities) Regulations.

AI-assisted research summary: The Regulations apply to all offers of asset-backed securities to the public or a section of the public in Kenya (including issues by state corporations and other public bodies), and the rules governing fixed income securities apply to asset-backed securities except where they conflict with these Regulations.

AI-assisted research summary: Defines securities issued in a securitization transaction where assets are transferred to a third party that issues the securities.

AI-assisted research summary: Written consent of the issuer's board of directors or governing body and the Authority must be sought before commencing any voluntary winding up proceedings of the issuer.

AI-assisted research summary: An auditor appointed by an issuer must be a member of the Institute of Certified Public Accountants of Kenya and must comply with the international standards on auditing when conducting the audit.

AI-assisted research summary: If an issuer delegates record-keeping to another entity, the officer in-charge of that other entity must be a member of the Institute of Certified Public Secretaries of Kenya.

AI-assisted research summary: An issuer must appoint a servicing agent.

AI-assisted research summary: A servicing agent must be independent of the issuer, but may be the originator if the originator provides the services on an arms-length basis and subject to market terms and conditions.

AI-assisted research summary: Servicing agents must keep records of receipts and payments relating to eligible assets and asset-backed securities, the portfolio of eligible assets, and every transaction carried out by the issuer; and must allow authorized agents of the Authority to inspect those records during working hours.

AI-assisted research summary: A servicing agent need not release funds to asset-backed securities holders until it has received the funds from the issuer.

AI-assisted research summary: A servicing agent may act as a liquidity provider to cover cashflow shortfalls so that timely payments are made to asset-backed securities holders.

AI-assisted research summary: A servicing agent who intends to resign must give three months written notice to the issuer and copy the notice to the Authority, stating the intention and reasons.

AI-assisted research summary: An issuer who intends to terminate a servicing agent must inform the Authority at least three months before termination and provide the Authority with a copy of the relevant notice and the reasons for termination.

AI-assisted research summary: An issuer must appoint a new servicing agent at least thirty days before the expiry of the outgoing agent's term and must ensure adequate time for hand-over and transfer of information so the incoming agent can perform duties.

AI-assisted research summary: An outgoing servicing agent must hand over to the incoming servicing agent all books of account, documents and records required to be kept under these Regulations.

AI-assisted research summary: A liquidity provider may refuse to advance funds to an issuer unless certain the amounts are recoverable and payable in full; a liquidity provider must not underwrite an issuer's credit risk or act as a credit enhancer unless appointed as one.

AI-assisted research summary: Be the trustee for the asset-backed securities holders.

AI-assisted research summary: A trustee is entitled to the rights that accrue to asset-backed securities holders, including access to information on the securitization transaction's performance and operation and the asset-backed securities issued under it.

AI-assisted research summary: To be an originator you must be a public company incorporated or registered under the Companies Act.

AI-assisted research summary: An originator may purchase up to ten percent of the total value of asset-backed securities issued from its own asset transfer (subject to regulation 37 and unless the Authority permits more); the limit does not apply to holding subordinated securities.

AI-assisted research summary: An issuer must be a company under the Companies Act or another form approved by the Authority; unless approved otherwise, it must be newly created with no prior creditors except formation expenses; at least one third of its board members must be independent directors.

AI-assisted research summary: The issuer must offer, issue and list asset-backed securities.

AI-assisted research summary: An issuer must not be marketed as a subsidiary or company within the originator's group, and the issuer's or product's name must not imply any relation to the originator.

AI-assisted research summary: An issuer must not be voluntarily wound up until its asset-backed securities are fully redeemed.

AI-assisted research summary: An originator must appoint a licensed advisor; the advisor must liaise with the Authority on offers, issues or listings of asset-backed securities; an originator may appoint other advisors it deems necessary.

AI-assisted research summary: The Authority must determine an applicant's suitability in consultation with the Mi; applications for approval must be submitted to the Authority in the prescribed form.

AI-assisted research summary: The Authority must inform the Cabinet Secretary of its decision to approve or reject an application.

AI-assisted research summary: The information memorandum and required information must be submitted to the Authority not less than twenty eight days before the opening of the offer period; the Authority may require additional disclosures.

AI-assisted research summary: The offer period cannot exceed thirty days from the date the offer opens unless the Authority approves otherwise.

AI-assisted research summary: Subscriptions for asset-backed securities must be made through one or more selling agents.

AI-assisted research summary: The issuer must apply subscription proceeds as stated in the information memorandum after the offer period closes; if the minimum subscription is not raised the issuer must refund subscribers.

AI-assisted research summary: Interest on the subscription proceeds must be paid into the Investor Compensation Fund.

AI-assisted research summary: If the Authority approves an amendment to the allotment policy, the issuer must announce that approval within twenty four hours of the grant of approval.

AI-assisted research summary: The results of the allotment of a public offer shall be published after the Authority has received prior notification of not less than twenty four hours.

AI-assisted research summary: Eligible assets are assets capable of generating a true and identifiable revenue stream that is projected to be sufficient to service the return of and return on investment as well as allowable expenses for the life of the asset-backed securities.

AI-assisted research summary: An originator must have and demonstrate an unencumbered right to transfer all legal and beneficial interests in the eligible assets and the rights to the eligible asset.

AI-assisted research summary: Originators must transfer their asset rights and obligations to the Issuer and must not retain beneficial interest or liability; they may, in specific circumstances, retain a right of first refusal or repurchase assets under specified conditions.

AI-assisted research summary: All securitization transactions must be rated by an independent credit rating agency approved and registered by the Authority.

AI-assisted research summary: Section 39 lists acceptable credit enhancement instruments and requires prior written consent from the Central Bank (for banks and financial institutions) or the Commissioner of Insurance (for insurance companies licensed in Kenya) before such credit enhancement may be provided.

AI-assisted research summary: Asset-backed securities may be listed on the fixed income securities market segment at an approved securities exchange in Kenya upon approval and issue.

AI-assisted research summary: A securities exchange must not suspend or de-list asset-backed securities without the prior written approval of the Authority.

AI-assisted research summary: If an asset-backed security is suspended or delisted, the securities exchange must publish that information within forty eight hours in at least two local dailies of national circulation.

AI-assisted research summary: An issuer of asset-backed securities approved to offer, issue or list must pay the prescribed fees.