The Capital Markets (Coffee Exchange) Regulations

These Regulations may be cited as the Capital Markets (Coffee Exchange) Regulations.

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Jurisdiction: Kenya
Instrument: Notice
Citation: Legal Notice 40 of 2020
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 (Coffee Exchange) Regulations. Defines "the office or facilities of a coffee buyer or service provider." Gives effect to section 12 (1) of the Capital Markets Act (Cap. 485A). A person must not operate a coffee exchange unless they have applied for approval and been licensed by the Authority in the manner the Authority provides. Rules a coffee exchange makes must be approved by the Authority before use; a member must ensure their employees comply with the rules.

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Provisions of The Capital Markets (Coffee Exchange) Regulations

Showing 53 of 53

Part I

PRELIMINARY

1
PRELIMINARY - 1. Citation

AI-assisted research summary: These Regulations may be cited as the Capital Markets (Coffee Exchange) Regulations.

Section 1. Citation Section These Regulations may be cited as the Capital Markets (Coffee Exchange) Regulations.
2
PRELIMINARY - 2. Interpretation

AI-assisted research summary: Defines "the office or facilities of a coffee buyer or service provider."

Section 2. Interpretation Section the office or facilities of a coffee buyer or service provider; or
3
PRELIMINARY - 3. Object, purpose and application

AI-assisted research summary: Gives effect to section 12 (1) of the Capital Markets Act (Cap. 485A).

Section 3. Object, purpose and application Section to give effect to section 12 (1) of the Capital Markets Act (Cap. 485A);

Part II

COFFEE EXCHANGE

4
COFFEE EXCHANGE - 4. Regulation of coffee exchanges

AI-assisted research summary: A person must not operate a coffee exchange unless they have applied for approval and been licensed by the Authority in the manner the Authority provides.

Section 4. Regulation of coffee exchanges Section 4(1) A person shall not carry on the business of a coffee exchange unless he has applied for approval and licensed as a coffee exchange by the Authority in such manner as the Authority may provide. Section 4(2)(a) are in a form satisfactory to the Authority; and Section 4(2)(a)(i) are in a form satisfactory to the Authority; and Section 4(2)(a)(ii) restrict the applicant to the business of operating a coffee commodity market and services incidental thereto; Section 4(2)(b) details of trading, clearing and settlement systems proposed to be adopted by the applicant; Section 4(2)(c) the application fees set out in the Second Schedule; Section 4(2)(d) satisfactory bank references; Section 4(2)(e) a business feasibility plan evaluated by an entity with a proven track record and expertise; and Section 4(2)(f) any such additional documents as the Authority may require. Section 4(3)(a) be demutualized; Section 4(3)(b) have a minimum authorized, issued and paid up equity share capital to support initial infrastructural investments and three years' operating capital; Section 4(3)(c) satisfy requirements relating to ownership and governance structure specified in these Regulations; Section 4(3)(d) have its directors and shareholders who hold or intend to hold share, determined as fit and proper persons as provided under section 24A of the Act; Section 4(3)(e) satisfy the Authority on the exchange's financial capacity functional expertise and infrastructure; Section 4(3)(f) have in its employment, sufficient number of persons with adequate professional and other relevant competencies and experience; and Section 4(3)(g) comply with any other conditions as may be specified by the Authority. Section 4(4) The Authority may, if satisfied that the applicant has demonstrated that it is capable of complying with the requirements under this regulation and upon payment of the licensing fee set out in the First Schedule, grant the applicant a licence to operate as a coffee exchange.
5
COFFEE EXCHANGE - 5. Rules and obligations of a coffee exchange

AI-assisted research summary: Rules a coffee exchange makes must be approved by the Authority before use; a member must ensure their employees comply with the rules.

Section 5. Rules and obligations of a coffee exchange Section 5(1)(a) the clear demarcation of roles and responsibilities of the board, chief executive officer and the committees of the board; Section 5(1)(b) the appointment of directors and a fair representation of persons in the selection of members of the board and administration of its affairs including the professions relevant to coffee industry; Section 5(1)(c) the powers of the chief executive officer including in emergency situations; Section 5(1)(d) the qualifications for membership; Section 5(1)(e) the exclusion from membership of persons who do not meet the minimum criteria on integrity; Section 5(1)(f) the expulsion, suspension or disciplinary action against members for conduct inconsistent with just and equitable principles relating to trading in coffee, or for a contravention of the rules of the coffee exchange; Section 5(1)(g) specify qualifications for applicants for membership and provisions for accepting applicants as trading participants, imposing conduct and other requirements on them; Section 5(1)(h) provide for the governance of the conduct activity of participants, including their responsibility to act with integrity and in the interests of maintaining a proper market, paying such fees and charges as may be applicable and abiding by the rules of the clearing house; Section 5(1)(i) prohibit market abuse practices; Section 5(1)(j) provide mechanisms for effectively investigating breaches of the rules, enforcing the rules and providing for appeals; Section 5(1)(k) make default provisions for the taking of proceedings or other action if a clearing member has failed, or appears to be unable, or likely to become unable, to meet his obligations for any unsettled or open market contracts to which he is a party; Section 5(1)(l) specify qualifications for trading membership, imposing conduct and other requirements on them and, where appropriate, for the procedure for their removal as trading members; Section 5(1)(m) the making of reports to the Authority by the exchange whenever it rejects any application for membership, where it suspends or expels a member or where it suspends trading; Section 5(1)(n) procedures for developing warrants and receipts to be traded on the exchange; Section 5(1)(o) the terms and conditions under which coffee or contracts may be traded; Section 5(1)(p) an audit system relating to proprietary trading by members; Section 5(1)(q) the standard coffee grades that may be traded by members and the terms and conditions governing trading by members; Section 5(1)(r) fair and properly supervised trading practices; Section 5(1)(s) measures to prevent market abuse in its coffee market; Section 5(1)(t) preventing the excessive use of credit by way of initial or maintenance margin in respect of the purchase or carrying of any coffee; Section 5(1)(u) the recording and publishing of details of trading, clearing and settlement; Section 5(1)(v) dues, fees and other charges levied by the exchange and its other sources of revenue; Section 5(1)(w) internal procedures to ensure the proper handling of complaints and to ensure that any appropriate remedial action on those complaints is promptly taken; Section 5(1)(x) the resolution of disputes and provision for appeal; Section 5(1)(y) the carrying on the business of the coffee exchange generally, including the development of a regional exchange, with due regard to the interests and protection of growers and investors; and Section 5(1)(z) any other provisions specified by the Authority. Section 5(2) The rules established and adopted by the exchange under paragraph (1) shall be approved by the Authority before being applied by the exchange. Section 5(3) The rules of a coffee exchange shall apply to the officers of the exchange, members and employees of the members of the exchange and the member shall be responsible to ensure their employees' compliance with the rules. Section 5(4) The Authority may require a coffee exchange to comply with such additional requirements as may be imposed on a commodities exchange under any written law.
6
COFFEE EXCHANGE - 6. Systems, staffing and record keeping

AI-assisted research summary: Provide and maintain a transparent and efficient system for coffee trading.

Section 6. Systems, staffing and record keeping Section provide and maintain a transparent and an efficient system for coffee trading;

Part III

COFFEE BROKERS

10
COFFEE BROKERS - 10. Furnishing of information, clarifications etc.

AI-assisted research summary: The Authority may require applicants (when considering an application under regulation 8) to provide further information about previous dealings; applicants or their key personnel must appear before the Authority to make personal representations if required.

Section 10. Furnishing of information, clarifications etc. Section 10(1) The Authority may, in considering an application made under regulation 8, require an applicant to furnish such further information regarding any previous dealings in securities, commodities and any other related matter as the Authority may consider necessary. Section 10(2) An applicant or its key personnel shall, if required by the Authority, appear before the Authority to make personal representations.
11
COFFEE BROKERS - 11. Grant of licence

AI-assisted research summary: The Authority must grant licences to eligible coffee broker applicants within thirty days, inform the coffee exchange and applicant of grants, must not refuse without a hearing, must communicate refusals with grounds within fourteen days after hearing, and aggrieved applicants may appeal to the Capital Markets Tribunal within fifteen days of receipt.

Section 11. Grant of licence Section 11(1) The Authority, shall, within thirty days from the date of application, grant a licence to an applicant, if the Authority is satisfied that the applicant is eligible to be licensed as a coffee broker. Section 11(2) The Authority shall duly inform the coffee exchange and the applicant of the grant of a licence under paragraph (1). Section 11(3) A licence granted under paragraph (1) shall remain valid until suspended or revoked. Section 11(4) The Authority shall not refuse to grant a licence without first giving the applicant an opportunity to be heard. Section 11(5) Where the Authority, after hearing the applicant, refuses to grant the applicant a licence, the Authority shall communicate the decision to the applicant and the coffee exchange within fourteen days of the hearing, stating the grounds for refusal. Section 11(6) An applicant aggrieved by the decision of the Authority under paragraph (5) may appeal against such refusal to the Capital Markets Tribunal within fifteen days of receipt of the decision of the Authority.
12
COFFEE BROKERS - 12. Annual licence fees

AI-assisted research summary: A coffee broker must pay an annual licence fee set out in the Second Schedule.

Section 12. Annual licence fees Section A coffee broker shall pay an annual licence fee as set out in the Second Schedule.
13
COFFEE BROKERS - 13. Suspension of a licence

AI-assisted research summary: The Authority may suspend a coffee broker's licence for specified grounds and must give the broker an opportunity to be heard before issuing a suspension or other administrative action.

Section 13. Suspension of a licence Section 13(1)(a) failed to comply with the Act, these Regulation or any directions made or given thereunder; Section 13(1)(b) failed to comply with any conditions subject to which the licence was granted under these Regulations; Section 13(1)(c) contravened the rules of the coffee exchange; Section 13(1)(d) failed to adhere to any requirement of the code of conduct laid down under these Regulations or other laws; Section 13(1)(e) failed to comply with the directives of the Authority in respect of business conduct, dealings with clients and financial prudence; Section 13(1)(f) failed to furnish any information relating to transactions of the coffee broker as may be required by the Authority; Section 13(1)(g) failed to submit periodical returns as required by the Authority; Section 13(1)(h) furnished the Authority or the exchange with wrong or false information; Section 13(1)(i) failed to settle an investor complaint where such complaint has been adjudicated by the exchange, a committee of the exchange, the Authority, the Capital Markets Tribunal, or a court of law; Section 13(1)(j) not co-operated in any enquiry or inspection conducted by the Authority; Section 13(1)(k) indulged in market manipulation, price rigging or cornering activities at a coffee exchange; Section 13(1)(l) experienced or is experiencing financial position deterioration to such an extent that the Authority is of the opinion that the continuance of the coffee broker in the business is no longer in the interest of investors; Section 13(1)(m) been suspended by the exchange; or Section 13(1)(n) failed to pay the annual fees; or it is necessary in the public interest to do so, Section 13(2) The Authority shall, before issuing an order of suspension or other administrative action under paragraph (1), give a coffee broker an opportunity to be heard.
14
COFFEE BROKERS - 14. Revocation of a licence

AI-assisted research summary: The Authority may issue an order revoking a coffee broker's licence for specified grounds, and must give the coffee broker an opportunity to be heard before issuing such an order.

Section 14. Revocation of a licence Section 14(1)(a) the reasons for suspension of a licence under regulation 13 continue during the period of such suspension; Section 14(1)(b) is engaging or has engaged in insider trading, market manipulation or any other unfair practice or market abuse; Section 14(1)(b)(i) is engaging or has engaged in insider trading, market manipulation or any other unfair practice or market abuse; Section 14(1)(b)(ii) has been found guilty of fraud or convicted of a criminal offence; Section 14(1)(b)(iii) has not complied with a directive of the Authority; Section 14(1)(c) the membership of that coffee broker has been cancelled by a coffee exchange or another securities exchange; or Section 14(1)(d) it is necessary for the protection of investors. Section 14(2) The Authority shall, before issuing an order of revocation under paragraph (1), give the coffee broker an opportunity to be heard.
15
COFFEE BROKERS - 15. Automatic revocation of a licence

AI-assisted research summary: Section ceases to be a trading member of a coffee exchange;

Section 15. Automatic revocation of a licence Section ceases to be a trading member of a coffee exchange;
16
COFFEE BROKERS - 16. Appeal against suspension or revocation of licence

AI-assisted research summary: A coffee broker who is aggrieved by the Authority's suspension or revocation of its licence may appeal to the Capital Markets Tribunal.

Section 16. Appeal against suspension or revocation of licence Section A coffee broker aggrieved by the decision of the Authority to suspend or revoke its licence may, within fifteen days of being notified of the decision of the Authority, appeal to the Capital Markets Tribunal.
17
COFFEE BROKERS - 17. Coffee broker to clear liabilities

AI-assisted research summary: A coffee broker must clear all its outstanding obligations up to the date on which it has been operating as such, even if its licence is suspended or revoked.

Section 17. Coffee broker to clear liabilities Section Despite a suspension or revocation of a licence, a coffee broker shall be responsible for clearing all its outstanding obligations up to the date on which that coffee broker has been operating as such.
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COFFEE BROKERS - 18. Continuing obligations

AI-assisted research summary: Continuing obligations

Section 18. Continuing obligations Section the net capital balance;
7
COFFEE BROKERS - 7. Obligation to seek a licence

AI-assisted research summary: A person must not carry on business as a coffee broker unless licensed by the Authority.

Section 7. Obligation to seek a licence Section A person shall not carry on or purport to carry on business as a coffee broker unless that person is licensed by the Authority.
8
COFFEE BROKERS - 8. Licensing of coffee brokers

AI-assisted research summary: A person who intends to operate as a coffee broker must apply to the Authority for a licence using Form B and (as part of the application) provide the fees, the documents/information/declarations specified under regulation 9, and a letter from the coffee exchange.

Section 8. Licensing of coffee brokers Section 8(1) A person who intends to operate as a coffee broker shall submit an application to the Authority for a licence to operate as such in Form B as set out in the First Schedule. Section 8(2)(a) the fees as set out in the Second Schedule; Section 8(2)(b) the documents, information and declarations specified under regulation 9; and Section 8(2)(c) a letter from the coffee exchange stating that the applicant meets all the relevant requirements of that exchange and that the exchange will admit the applicant if licensed by the Authority.
9
COFFEE BROKERS - 9. Consideration for grant of licence

AI-assisted research summary: The text includes the phrase: "Section be a company limited by shares;"

Section 9. Consideration for grant of licence Section be a company limited by shares;

Part IV

COFFEE SAMPLING

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COFFEE SAMPLING - 19. Central sample room

AI-assisted research summary: An exchange must maintain a central sample room to hold coffee samples for distribution, display and archiving, and must maintain an online portal providing information on coffee samples, quality and quantity accessible to buyers and interested persons.

Section 19. Central sample room Section 19(1) An exchange shall maintain a central sample room where samples of coffees to be offered for sale shall be held for distribution to buyers and roasters, and for display and archiving. Section 19(2) An exchange shall maintain an on-line portal in which information on coffee samples, quality and quantity of coffee on offer at the exchange will be accessible to intending buyers and interested persons.
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COFFEE SAMPLING - 20. Sample deposit

AI-assisted research summary: Buyers and roasters at an exchange must deposit an amount determined by the exchange as security for collecting offer samples; the exchange must operate a designated bank account for these deposits; the exchange must suspend buyers or roasters who fail to top up raised sample fee invoices by the due date.

Section 20. Sample deposit Section 20(1) Every buyer and roaster operating at an exchange shall be required to deposit such amount of money as determined by the exchange from time to time, as security for collecting offer samples at the exchange. Section 20(2) An exchange shall operate a coffee sample deposit account in a bank to be determined by the exchange in which all the sample deposits paid by buyers and roasters shall be deposited. Section 20(3)(a) sample fees netted off against samples collected by buyers and roasters; Section 20(3)(b) refunds to buyers and roasters ceasing to trade; and Section 20(3)(c) such interest earned or accruing from the sample deposit account. Section 20(4) A buyers or roaster who fail to pay the raised sample fees invoices within the due dates shall be suspended by the exchange from further collection of samples until such top ups are made. Section 20(5) Any refunds under paragraph (3)(b) shall be made without interest and net of any indebtedness by the buyer or roaster to the exchange. Section 20(6) No interest shall accrue to the benefit of the buyers or roasters in respect of the sample deposit.
21
COFFEE SAMPLING - 21. Offer sample

AI-assisted research summary: The exchange must provide an offer sample from a lot of coffee to licensed buyers and roasters before the auction.

Section 21. Offer sample Section An offer sample out of a lot of coffee presented for sale at an exchange shall be availed by the exchange to licensed buyers and roasters prior to the auction.
22
COFFEE SAMPLING - 22. Sample fee

AI-assisted research summary: Every buyer or roaster must pay a sample fee for all selling samples collected within fourteen days of receiving an invoice from an exchange.

Section 22. Sample fee Section Every buyer or roaster shall within fourteen days of receipt of an invoice from an exchange pay a sample fee in respect of all the selling samples collected.
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COFFEE SAMPLING - 23. Recovery of sample fee

AI-assisted research summary: All buyers and roasters must maintain a minimum sample deposit balance; the exact amount will be determined by the exchange.

Section 23. Recovery of sample fee Section A buyer or roaster shall be given a fourteen days' notice to pay the outstanding sample fee and in default thereof, the fees shall be recovered from the sample deposit provided that all buyers and roasters shall maintain a minimum sample deposit balance of an amount to be determined by the exchange.
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COFFEE SAMPLING - 24. Deduction and remission of sample fee

AI-assisted research summary: An exchange must deduct the invoiced sample fee from the forfeited sample deposit.

Section 24. Deduction and remission of sample fee Section An exchange shall deduct the sample fee invoiced from the forfeited sample deposit.
25
COFFEE SAMPLING - 25. Representative samples

AI-assisted research summary: Miller or appointed broker must deliver representative samples from a lot of coffee offered for sale at an exchange to the sample room, and those samples must follow the exchange's prevailing procedures.

Section 25. Representative samples Section 25(1) A miller or an appointed broker shall deliver to the sample room, representative samples out of a lot of coffee being offered for sale at an exchange in such quantities as may be determined from time to time by the exchange. Section 25(2) The samples delivered by the millers or appointed brokers to the sample room shall be in accordance with the prevailing procedures as determined by the exchange from time to time.
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COFFEE SAMPLING - 26. Reference sample

AI-assisted research summary: Exchanges must draw and keep a reference coffee sample from each lot for at least six months after sale; if a dispute exceeds six months an expert must analyse the sample and the quality report submitted to the exchange.

Section 26. Reference sample Section 26(1) A reference sample of coffee shall be drawn from each lot and retained by an exchange for archival storage, for at least six months from the date of the sale for verification in case of a dispute: Section 26(2) Notwithstanding paragraph (1), where a dispute exceeds six months, an analysis of the sample shall be done by an expert and the quality report submitted to the exchange.
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COFFEE SAMPLING - 27. Buying sample

AI-assisted research summary: A buying sample of coffee shall be drawn from each lot purchased at the auction and made available to the buyer or roaster who purchased the lot for verification.

Section 27. Buying sample Section A buying sample of coffee shall be drawn from each lot of coffee purchased at the auction to be availed to the buyer or roaster who has purchased the lot for verification.
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COFFEE SAMPLING - 28. Display sample

AI-assisted research summary: A display sample shall be drawn for display in the sample room.

Section 28. Display sample Section A display sample shall be drawn for display in the sample room.
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COFFEE SAMPLING - 29. Sample records

AI-assisted research summary: Section 29 concerns receipt of coffee samples from the millers.

Section 29. Sample records Section receipt of coffee samples from the millers;
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COFFEE SAMPLING - 30. Sale of sweepings to benefit growers

AI-assisted research summary: Proceeds from sale of sweepings must be remitted to growers through the direct settlement system provider on a prorated basis and the proceeds shall have unique codes.

Section 30. Sale of sweepings to benefit growers Section Proceeds of sale for sweepings shall be remitted to growers through the direct settlement system provider on a prorated basis and shall have unique codes.
31
COFFEE SAMPLING - 31. Submission of sample returns

AI-assisted research summary: Millers or brokers must submit returns to an exchange and the Coffee Directorate when remitting monies from samples and sweepings to growers; exchanges must file auction returns at weekly, monthly, biannual and annual intervals and must prepare monthly performance reports and send them to listed stakeholders.

Section 31. Submission of sample returns Section 31(1) A miller or broker shall submit returns to an exchange and the Coffee Directorate on remission of monies received from samples and sweepings to the growers. Section 31(2) An exchange shall make weekly, monthly, biannual and annual auction returns to the Coffee Directorate. Section 31(3) An exchange shall prepare monthly reports on its performance and forward the same to the Coffee Directorate, buyers, roasters, millers, growers or growers' representatives and other interested parties.
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COFFEE SAMPLING - 32. Resolution of disputes

AI-assisted research summary: If a dispute arises over coffee traded at an exchange and a complainant requests it, a random representative sample shall be redrawn for comparison; the exchange or licensing authority must instruct the licensed warehouseman to allow redrawing by the aggrieved party, and any interested party may witness the redrawing.

Section 32. Resolution of disputes Section 32(1) In the event of a dispute arising out of coffee traded at an exchange and at the request by a complainant made to the exchange or the licensing authority, a random representative sample shall be redrawn from the lot or consignment in dispute for comparison with the reference sample. Section 32(2) The instructions to draw each sample shall be lodged at the exchange or the licensing authority which shall in turn instruct the licensed warehouseman to allow redrawing of samples by the aggrieved party and any interested party may witness the exercise. Section 32(3) In the event of a marked difference between the reference sample and the redrawn sample, additional samples shall be drawn from each bag in the lot and such individual sample together with the bag from which it has been drawn shall be referenced accordingly. Section 32(4) In the event that the dispute is unresolved by the exchange or the licensing authority, it shall be referred to the Capital Markets Tribunal established under the Capital Markets ( Cap. 485A ).

Part V

TRADING AT THE AUCTION FLOOR

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TRADING AT THE AUCTION FLOOR - 33. Participation at the trading floor

AI-assisted research summary: Only licensed persons may participate on the coffee exchange trading floor; participants on the trading floor must pay the applicable auction levy.

Section 33. Participation at the trading floor Section 33(1) Only licensed persons under these Regulations and other relevant laws shall participate on the trading floor of a coffee exchange. Section 33(2) The participants on the trading floor shall be required to pay to the exchange the applicable auction levy.
34
TRADING AT THE AUCTION FLOOR - 34. Holding of auctions at the Exchange

AI-assisted research summary: The exchange must set the volumes, lot sizes, dates and times for holding coffee auctions, in consultation with millers or appointed brokers.

Section 34. Holding of auctions at the Exchange Section 34(1) The exchange shall, in consultation with millers or appointed brokers, as the case may be, set the volumes, lot sizes, dates and times for holding of coffee auctions. Section 34(2) Notwithstanding paragraph (1) provided that no suspension or cancellation of any auction shall be done without notification to the Authority.
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TRADING AT THE AUCTION FLOOR - 35. Sales catalogue

AI-assisted research summary: Section 35. Sales catalogue Section 35(1) A sales catalogue shall be prepared by the grower miller or an appointed broker in accordance with the Third Schedule. Section 35(2) The exchange shall, in consultation with grower millers or

Section 35. Sales catalogue Section 35(1) A sales catalogue shall be prepared by the grower miller or an appointed broker in accordance with the Third Schedule. Section 35(2) The exchange shall, in consultation with grower millers or appointed brokers as the case may be, determine the order of the sales catalogues for every sale and the exchange shall ensure that reasonable access to the auction is given to all persons licensed to trade under the Crops (Coffee) (General) Regulations. Section 35(3) A draft of the sales catalogue of each grower miller or broker shall be made available to buyers and roasters in accordance with the prevailing procedures of an exchange. Section 35(4) The final sales catalogue shall be made available to the exchange by the grower miller or broker in accordance with the prevailing procedures of an exchange.
36
TRADING AT THE AUCTION FLOOR - 36. Disclosure of bulked coffee

AI-assisted research summary: A miller must disclose to the broker and the exchange details of all bulked coffees and justify its basis.

Section 36. Disclosure of bulked coffee Section A miller shall disclose to the broker and the exchange, details of all bulked coffees and justify its basis.
37
TRADING AT THE AUCTION FLOOR - 37. Conditions of auction sales

AI-assisted research summary: Trading at the auction must be in US Dollars or any other currency determined by the exchange with the approval of the Authority.

Section 37. Conditions of auction sales Section Trading at the auction shall be in US Dollars or any other currency as may be determined by the exchange with the approval of the Authority.
38
TRADING AT THE AUCTION FLOOR - 38. Process of trading at the exchange

AI-assisted research summary: Section 38 establishes rules for trading coffee at the exchange including that a miller shall deposit clean and graded coffee at a licensed warehouse; warehousemen must issue warrants or receipts and guarantee delivery; owners acting through brokers must authorize sales; registry, verification, invoicing, settlement and title transfer steps are required; growers set reserve prices; exchanges must not disclose reserve prices to buyers but must disclose them to the Authority on request.

Section 38. Process of trading at the exchange Section 38(1)(a) a miller shall deposit clean and graded coffee at a designated licensed warehouse, and where the clean coffee is a bulk, the respective coffee growers and the proportions of their coffee will be stated in writing; Section 38(1)(b) the coffee shall meet defined quality standards for commodity trading at the exchange at which the coffee will be offered for sale; Section 38(1)(c) the warehouseman shall issue a coffee warrant as set out in the Fourth Schedule or transferable warehouse receipts as the case may be, stating the quantity and quality of the coffee deposited and ensure traceability of the coffee; Section 38(1)(d) the warehouseman shall guarantee delivery of the coffee described in the coffee warrant or warehouse receipt as the case may be, and in the event of loss or failure of delivery, the warehouseman shall be liable; Section 38(1)(e) a coffee warrant or warehouse receipt as the case may be, issued shall be transferred to a new holder who is entitled to take delivery of the coffee upon presentation of the coffee warrant or warehouse receipt at the warehouse; Section 38(1)(f) when the owner of coffee deposited in a warehouse decides to trade and is acting through a broker, the owner shall contact the broker and give authority to sell; Section 38(1)(g) for purposes of sale, the miller shall input the details of the coffee warrant or warehouse receipt as the case may be, into the central registry of the exchange at which coffee will be offered for sale; Section 38(1)(h) the collateral manager, where applicable, shall confirm that the warehouse receipt as the case may be, is valid by inspecting and auditing underlying commodities in warehouse; Section 38(1)(i) upon verification, details in the central registry shall be confirmed into the central order book ready for trading; Section 38(1)(j) once the sale of coffee is complete, successful bidders shall be invoiced by the miller or broker and payments of the proceeds shall be effected through direct settlement system net of contract and any statutory charges; Section 38(1)(k) upon confirmation of payment by the direct settlement system provider and endorsement by the exchange, title to coffee shall be transferred to the buyer by changing ownership details in the coffee warrant or warehouse receipt, as the case may be, at the central registry; and Section 38(1)(l) new owners will thereafter be at liberty to take delivery of the coffee. Section 38(2) The grower or the grower's agent shall set the reserve price for each lot in the sales catalogue. Section 38(3) An exchange shall not disclose the reserve price to a buyer, roaster or any other party whatsoever provided such reserve prices shall be disclosed to the Authority when requested. Section 38(4) In the event that the highest bid for any lot is equal to or higher than the reserve price it shall be confirmed. Section 38(5) Where the bid has not been confirmed, the miller or other agent of the grower shall disclose the reserve price at the trading floor. Section 38(6) Where the disclosure of the reserve price does not attract any competitive offers, the coffee shall be withdrawn and re-offered for sale at a subsequent auction. Section 38(7) A "No-Bid" lot shall be re-offered for sale at a subsequent auction. Section 38(8) All trading in coffee shall be concluded at the trading floor.
39
TRADING AT THE AUCTION FLOOR - 39. Withdrawal of a lot

AI-assisted research summary: Miller or broker may withdraw a lot by written notice at least three working days before sale and must state reasons; the exchange must tell all buyers and roasters in writing at least two working days before sale.

Section 39. Withdrawal of a lot Section 39(1) A miller or broker may, by written communication to an exchange, made at least three working days prior to the date of sale, withdraw a lot that was destined for sale and such written communication shall also state the reasons for withdrawal. Section 39(2) The exchange shall communicate the withdrawal in writing to all buyers and roasters at least two working days prior to the date of sale. Section 39(3) Samples of lots withdrawn shall not be compensated.
40
TRADING AT THE AUCTION FLOOR - 40. Prompt date

AI-assisted research summary: The prompt date must be specified on the sales catalogue and must be not more than five working days following the date of the sale; coffees must be paid within the prompt date against an invoice presented by the miller.

Section 40. Prompt date Section 40(1) The prompt date shall be specified on the sales catalogue and shall be not more than five working days following the date of the sale. Section 40(2) All coffees shall be paid for within the prompt date against an invoice presented by the miller.

Part VI

SETTLEMENT OF SALES PROCEEDS

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SETTLEMENT OF SALES PROCEEDS - 41. Direct settlement system

AI-assisted research summary: Establishes a direct settlement system for coffee proceeds to be set up by a licensed commercial bank selected by an exchange with Authority approval and defines duties for buyers, growers, millers/brokers, exchanges, commercial banks and service providers to use and support that system.

Section 41. Direct settlement system Section 41(1) A direct settlement system shall be established by a licensed commercial bank competitively selected by an exchange subject to approval from the Authority and managed by that exchange. Section 41(2) The requirements for the operation of the direct settlement system shall be as set out in the Fifth Schedule. Section 41(3) The proceeds of the sale of coffee at the auction shall be remitted by a coffee buyer or roaster through a direct settlement system for onward settlement to the service providers and net payment to the grower. Section 41(4) A coffee grower or the grower's authorized representatives, shall after the commencement of these Regulations, supply through the coffee exchange all the necessary particulars of the grower to the appointed financial institution providing the direct settlement system to the grower, for purposes of initiating the settlement system. Section 41(5) The grower or the grower's authorized representatives shall also through the coffee exchange lodge with the financial institution providing the direct settlement system, any relevant contracts of service for which payment will be due from the grower, and any other document showing outstanding liabilities payable by the grower, for purposes of settlement through the system. Section 41(6) The grower or the grower's authorized representatives shall ensure that the information provided under paragraphs (4) and (5) above is correct and relevant and they shall be liable for any loss or other consequences resulting from any incorrect information given to the commercial bank, through the coffee exchange, providing the settlement system. Section 41(7) A coffee exchange shall indemnify the grower's authorized representatives in the event that it provides incorrect information different from the one submitted by grower's authorized representatives for onward transmission to the commercial bank providing the settlement system. Section 41(8) The miller or broker shall generate invoices for coffee sold at an exchange and send a copy to the buyer or roaster and the exchange shall send the transaction file to the direct settlement system provider to validate the information supplied by the miller. Section 41(9) The commercial bank operating the direct settlement system and the exchange where coffee is offered for sale, shall maintain records of all trade transactions. Section 41(10) The commercial bank in which the direct settlement system is housed shall make the operations of the direct settlement system electronically accessible to interested parties or their authorized representatives. Section 41(11) The commercial bank operating the direct settlement system shall prepare monthly and annual reports on its operations for submission to the exchange and the exchange shall make the reports accessible to interested parties. Section 41(12) For purposes of payment by the direct settlement system, a service provider shall supply authenticated documents in support of any claim not later than three months of that service provided that such claims are supported with prior agreements between the growers and such service providers and lodged with the direct settlement service provider through the coffee exchange. Section 41(13) The commercial bank operating the direct settlement system shall be responsible for provision of clearing, delivery and settlement services of proceeds from coffee traded at the exchange. Section 41(14) The operations of the direct settlement system shall be in accordance with laws relating to banking and finance and any laws governing the exchange. Section 41(15)(a) settling trading accounts; Section 41(15)(b) collecting and maintaining margin monies; Section 41(15)(c) reporting trading data; Section 41(15)(d) maintaining a database for trading activities; Section 41(15)(e) receiving millers' invoices for processing; and Section 41(15)(f) authenticating the millers' invoices against the transaction file. Section 41(16) The direct settlement system of payment of coffee proceeds shall be put in place by the exchange within a period not exceeding twelve months upon the commencement of these Regulations.
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SETTLEMENT OF SALES PROCEEDS - 42. Settlement of bank charges

AI-assisted research summary: Buyers and roasters must settle bank charges when paying; miller charges are deducted by the clearing house. Defaults trigger bank notifications, interest in USD from the day after the prompt date, suspension from trading, penalties if unpaid within five working days, resale and recovery of shortfalls, and reporting for repeated default.

Section 42. Settlement of bank charges Section 42(1) Any bank charges incurred by the buyer or roaster upon making payment shall be settled by the buyer or roaster, whilst those incurred by the miller upon receipt of coffee sale proceeds shall be deducted directly by the clearing house into which the proceeds have been paid. Section 42(2) A buyer or roaster who will not have settled his payments in full by the set deadline as per rules or operations of the exchange shall be considered a defaulter. Section 42(3) In the event of default by a buyer or roaster to pay by the set deadline, the bank shall immediately issue a notification of the outstanding payments and the interest rates chargeable to the defaulter with a copy to the miller and the exchange and the buyer or roaster shall be automatically suspended from participating on the trading floor until the buyer or roaster pays the outstanding amounts in full and the interest. Section 42(4) The interest on the outstanding payments shall accrue effective from the day following the prompt date at the prevailing commercial bank lending rate at the settlement bank in USD. Section 42(5) If the defaulter does not pay the outstanding amounts together with interest thereon within five working days from the prompt date, the defaulter shall be liable to pay a penalty and the coffee shall be reoffered for sale at a subsequent auction. Section 42(6) In the event that after reselling the coffee, any shortfall in value from the original bid occurs, the miller shall notify the Authority and the exchange of the shortfall, all accrued interest and any other related expenses and losses for the purpose of recovery of the entire amounts from the defaulter or from the performance bond of the defaulter. Section 42(7) A buyer, roaster or miller who fails to pay any outstanding obligations to the exchange or to a grower shall be suspended by the exchange with notice to the Authority. Section 42(8) The exchange shall lift a suspension upon settlement of outstanding obligations. Section 42(9) The exchange shall report any buyer, miller or roaster who has defaulted more than twice within a period of six months, to the relevant authority for suspension or cancelation of the license.
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SETTLEMENT OF SALES PROCEEDS - 43. Dispute relating to coffee trade

AI-assisted research summary: Rules for resolving coffee quality disputes: claims must be made on sealed samples; buyers/roasters must claim within three working days if quality differs; parties may negotiate settlements including compensation, sorting, bulking, price adjustments or refunds; buyers/roasters can charge re-bagging costs for incorrect packaging; unresolved disputes are referred to the exchange or licensing authority and aggrieved parties may appeal to the Capital Markets Tribunal.

Section 43. Dispute relating to coffee trade Section 43(1) Where a dispute arises in regard to coffee quality, a claim may be brought within sixty days of sale. Section 43(2) The claim shall be based on samples drawn and sealed by a licensed certified warehouse in the original storage location. Section 43(3) In the event of a quality difference between the offer and buying samples, and the actual coffee lot, the buyer or roaster shall make an immediate claim to the miller or appointed broker within three working days and reference may be made to the reference samples. Section 43(4) Where the actual coffee lot does not conform to the buying sample, the parties may, by mutual consent, negotiate a settlement which may include compensation for opportunity cost of funds involved payable by the person who is responsible for the coffee quality difference. Section 43(5) The parties shall be at liberty by mutual consent to agree to a settlement that may also include sorting, bulking, price adjustment or refund. Section 43(6) Incorrect information on the packaging material used for a specific lot shall give the right to a buyer or roaster to charge the miller for all the costs of re-bagging. Section 43(7) In the event that the dispute remains unresolved, it shall be referred to the exchange or the licensing authority. Section 43(8) In the event that an aggrieved party is dissatisfied with the decision of the exchange or the licensing authority, the party shall have the right of appeal to the Capital Markets Tribunal established under the Capital Markets Act ( Cap. 485A ).
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SETTLEMENT OF SALES PROCEEDS - 44. Disputes relating to coffee weight loss

AI-assisted research summary: Licensed warehousemen are responsible for weight loss (the difference between warrant/receipt weight and the released weight note); buyers/roasters must present weight-loss claims within thirty days of sale (unless within exchange tolerance); disputes not resolved amicably must be referred to the exchange; dissatisfied parties may refer to the Authority, which will trigger arbitration if necessary.

Section 44. Disputes relating to coffee weight loss Section 44(1) A licensed warehouseman shall be responsible for any weight loss which shall be the difference between the weight indicated in the coffee warrant or the warehouse receipt as the case may be, and the weight indicated in the weight note provided to the buyer or roaster at the time of release of coffee. Section 44(2) The weight loss claim will be limited to a period of thirty days from the date of the sale and shall be presented by the buyer or roaster to a licensed warehouseman except when such a claim on weight loss is within the acceptable tolerance levels as determined by the exchange from time to time. Section 44(3) Where the disputing parties fail to reach an amicable settlement, the dispute shall be referred to the exchange. Section 44(4) In the event that an aggrieved party is dissatisfied with the decision of the exchange, the party shall refer the matter to the Authority for resolution, failing which the Authority shall put in motion the arbitration process.

Part VII

GENERAL PROVISIONS

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GENERAL PROVISIONS - 45. Assumption of risk

AI-assisted research summary: The warehouseman must ensure the coffee is insured at all times before receipt of payment and release.

Section 45. Assumption of risk Section Prior to payment of the purchase price by the buyer, the property in the coffee shall remain in the grower and it shall be upon the warehouseman to ensure that the coffee is insured at all times prior to receipt of payment and release of the coffee.
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GENERAL PROVISIONS - 46. Accounts and Audit

AI-assisted research summary: The exchange must prepare an annual report with audited financial statements within four months of the close of the financial year and those statements must include a balance sheet, income statement, all changes in equity, cash flow statement, and accounting policies and explanatory notes.

Section 46. Accounts and Audit Section 46(1)(a) all sums received and expended by the exchange and matters in respect to which the receipt and expenditure took place; Section 46(1)(b) all sales and purchase of goods by the exchange; and Section 46(1)(c) the assets and liabilities of the exchange. Section 46(2) The exchange shall prepare an annual report containing audited financial statements within four months of the close of the financial year. Section 46(3)(a) balance sheet; Section 46(3)(b) income statement; Section 46(3)(c) all changes in equity; or Section 46(3)(c)(i) all changes in equity; or Section 46(3)(c)(ii) changes in equity other than those arising from capital transactions with owners and distributions to owners; Section 46(3)(d) cash flow statement; and Section 46(3)(e) accounting policies and explanatory notes.
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GENERAL PROVISIONS - 47. Operating capital of an exchange

AI-assisted research summary: An exchange must meet minimum operating capital sufficient to cover twelve months of its operating costs.

Section 47. Operating capital of an exchange Section An exchange shall comply with the minimum operating capital requirements covering twelve months of its operating costs.
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GENERAL PROVISIONS - 48. Appeal

AI-assisted research summary: Persons aggrieved by an exchange may appeal to the Authority within thirty days of notification; applicants dissatisfied with the Authority's decision may seek judicial recourse within thirty days of the decision.

Section 48. Appeal Section 48(1) Any person aggrieved by an act or omission of an exchange may within thirty days after being notified of such act, omission or decision, appeal to the Authority. Section 48(2) Where an applicant is dissatisfied with the decision of the Authority in sub regulation (1), the applicant may seek judicial recourse within thirty days of the decision.
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GENERAL PROVISIONS - 49. Declaration of stocks

AI-assisted research summary: Licensed buyers, roasters and millers must declare held stocks to an exchange; coffee sold on one exchange may not be re-offered on another exchange.

Section 49. Declaration of stocks Section 49(1) All licensed buyers, roasters and millers shall be required to declare held stocks to an exchange to facilitate scheduling of coffee auctions. Section 49(2) Coffee offered and sold at an exchange shall not be re-offered at any other exchange.
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GENERAL PROVISIONS - 50. Certificate of purchase

AI-assisted research summary: An exchange must issue a certificate of purchase after every sale of coffee; persons must not alter certificates; licensed buyers or exporters must submit export-related certificates and a non-negotiable bill of lading to the exchange within fourteen days of export.

Section 50. Certificate of purchase Section 50(1) An exchange shall, after every sale of coffee, issue to the purchaser a certificate of purchase in such form, and containing such details of the coffee purchased, as the Authority may prescribe. Section 50(2) A person shall not alter any certificate or other document issued or prepared for the purposes of these Regulations. Section 50(3) A licensed buyer or other person exporting any coffee shall, within fourteen days of the export of that coffee, submit to the exchange a copy of the relevant certificate of origin or certificate of re-export, as the case may be, stamped by the Commissioner of Customs and Excise, together with a non-negotiable bill of lading relating to the coffee.
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GENERAL PROVISIONS - 51. Exemptions

AI-assisted research summary: An exemption applies to a sample or a parcel not exceeding twenty kilograms in weight.

Section 51. Exemptions Section consists only of a sample or a parcel not exceeding twenty kilograms in weight; or
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GENERAL PROVISIONS - 52. Approval from the Authority

AI-assisted research summary: A coffee exchange that trades coffee must seek the Authority's approval and licence within twelve months of these Regulations commencing and do so in compliance with the Regulations.

Section 52. Approval from the Authority Section A coffee exchange carrying on trading in coffee shall, within twelve months of commencement of these Regulations seek the approval and licence from the Authority in compliance with these Regulations.
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GENERAL PROVISIONS - 53. Transitional provisions

AI-assisted research summary: Persons trading at a coffee exchange before these Regulations must apply to the Authority for a licence within twelve months after commencement.

Section 53. Transitional provisions Section A person carrying on trading at a coffee exchange prior to the commencement of these Regulations, shall be required to make an application to the Authority for licensing within a twelve months after the commencement of these Regulations.

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