The Capital Markets (Licensing Requirements) (General) Regulations

Section 1. Citation Section These Regulations may be cited as the Capital Markets (Licensing Requirements) (General) Regulations.

Section 2. Interpretation Section any person responsible for the incorporation of a listed company;

Section 3. Application for approval Section 3(1) An application for grant of approval to operate as a securities exchange shall be submitted to the Authority in Form 1 set out in the First Schedule. Section 3(2)(a) the rules, memorandum and articles of association of the applicant which shall be in a form that is satisfactory to the Authority and restricts the applicant to the business of operating a securities exchange and services incidental thereto; Section 3(2)(b) details of the trading system proposed to be adopted by the applicant; Section 3(2)(c) the prescribed fees set out in the Second Schedule; and Section 3(2)(d) such additional documents as may be required by the Authority .

Section 4. Rules of the securities exchange Section 4(1)(a) admission to the listing, suspension or de-listing of securities by the securities exchange, through a procedure prescribed by the Authority ; Section 4(1)(b) conditions governing dealing in securities by its trading participants so as to ensure protection of the rights of investors; Section 4(1)(c) prompt disclosure, in a manner that is fair to all investors, of material information of a price sensitive nature and information likely to affect the price of a security including fees on management contracts, to enable appraisal of an issue by investors; Section 4(1)(d) protection of investors against abuse of confidential information, misleading information, fraud, deceit, and other adverse practices in the issuing and trading of securities; Section 4(1)(e) prohibition of market manipulation in any form; Section 4(1)(f) investigation into trading in securities and financial transactions of trading participants and for conducting surprise checks on such trading participants; Section 4(1)(g) suspension of trading of any security for the protection of investors or for the conduct of orderly and fair trading; Section 4(1)(h) the...

Section 5. Membership of securities exchange Section 5(1) Trading participants of a securities exchange shall be licensees of the Authority with rights to trade at an approved securities exchange. Section 5(1A) The Authority may prescribe limits on the ownership of a securities exchange by its trading participants. Section 5(2)(a) if that person satisfies any admission requirements of the securities exchange; and Section 5(2)(b) on payment of admission fee approved by the Authority under section 29(2) of the Act, Section 5(3) A trading participant of a securities exchange or a director or a shareholder of a trading participant shall not be a director or hold beneficial interest either directly or indirectly in more than one trading participant of a securities exchange unless the trading participants has been exempted by the Authority on the basis of evidence of adequate internal controls to address conflict of interest. Section 5(4) In case of a listed trading participant of a securities exchange, an interest of fifteen per cent or more of the voting shares held directly or indirectly shall be deemed to be a person’s beneficial interest for purpose of these Regulations. [ L.N. 88/2...

Section 6. Chairman, directors and chief executive Section 6(1) A securities exchange shall have a chief executive who shall be in charge of the day to day operations of the securities exchange and an administration of sufficient professional capability to carry out trading, clearing and compliance functions of its trading participants and listed companies. Section 6(2)(a) at least ten years’ experience at a senior management level in matters relating to law, finance, accounting, economics, banking or insurance; and Section 6(2)(b) expertise in matters relating to money, capital markets or finance. Section 6(3)(a) there shall be a fixed term of office for its chairman and chief executive, which shall be three years, renewable once for the chairman and four years renewable once for the chief executive; Section 6(3)(b) a board of directors comprising of the chief executive of the securities exchange and at least one third independent and non-executive directors; Section 6(3)(c) a maximum of two members of the board of directors who shall be elected from among or to represent the trading participants; Section 6(3)(d) the independent and non-executive directors appointed under subparag...

Section 7. Requirements for approval of a securities exchange trading system Section 7(1) A trading system to be adopted by a securities exchange shall be approved by the Authority before such system is implemented. Section 7(2)(a) a trading facility at which all bids to purchase and offers to sell are exposed to each other and at which members of the public are granted an opportunity to witness trading; Section 7(2)(b) displays the best offer and bid prices; Section 7(2)(b)(i) displays the best offer and bid prices; Section 7(2)(b)(ii) provides for automatic matching; Section 7(2)(b)(iii) displays the highest and lowest prices, the latest transactions as well as the volume of securities traded; Section 7(2)(b)(iv) has an audit trail and trace back mechanism for all transactions; Section 7(2)(b)(v) has sufficient internal controls and security measures to ensure that only authorized persons have access; Section 7(2)(b)(vi) provides for integration with a central depository system; and Section 7(2)(b)(vii) maintains records of all transactions and retrieves such records as may be necessary.

Section 8. Submission of annual budget Section 8(1) A securities exchange shall submit its annual budget to the Authority not later than thirty days before the commencement of its financial year. Section 8(2) Any revisions to the budget shall be submitted to the Authority not later than fifteen days before the commencement of its financial year. Section 8(3)(a) disclose details of revenue and expenditure as prescribed under these Regulations; Section 8(3)(b) make provision for a minimum of twenty per cent of the total annual listing fees receivable each financial year to support the development of the securities exchange infrastructure and investor education programme.

Section 9. Self-regulation Section 9(1)(a) a procedure and appropriate system of exercising self-regulation over its trading participants; Section 9(1)(b) a code of conduct for its trading participants; Section 9(1)(c) adequate trading surveillance and compliance capacity; and Section 9(1)(d) a procedure for dispute resolution. Section 9(2)(a) the rules of the securities exchange approved by the Authority ; and Section 9(2)(b) laws, regulations and guidelines relating to securities issued by the Authority . Section 9(3)(a) promote investor protection; Section 9(3)(b) promote fair treatment of its trading participants and any person who applies for admission as a trading participant; Section 9(3)(c) exclude a person who is not fit and proper from being its trading participant or being appointed as its chief executive, director or officer; Section 9(3)(d) promote proper regulation and supervision of its trading participants; Section 9(3)(e) promote appropriate standards of conduct of its trading participants; Section 9(3)(f) manage any conflict of interest which may arise between its interest and the interest of investors and the general public; Section 9(3)(g) ensure that its tradin...

Section 10. Records to be maintained Section its shareholders;

Section 11.[Deleted byL.N. 88/2012, r. 9.]

Section 12. Reporting obligations Section 12(1) A securities exchange shall within four months after the end of each financial year make available to the Authority , and to the investors, a summary of information on companies listed at the securities exchange. Section 12(2)(a) published accounts of companies listed on such securities exchange including balance sheet and profit and loss statements; Section 12(2)(b) date of incorporation, date of listing, names of directors, share capital, number and value of shares issued, and any changes in the share capital; Section 12(2)(c) details of securities transacted and the prices (high, low and mid-market) at which such securities have been transacted during the year; and Section 12(2)(d) earnings per share, dividend per share, shareholding structure (institutional, individual and foreign investors), principal or controlling shareholders and total number of shareholders. Section 12(3)(a) name of the issuer and date of incorporation; Section 12(3)(b) date of listing; Section 12(3)(c) names of directors; Section 12(3)(d) principal/controlling shareholders; Section 12(3)(e) total number of shareholders; Section 12(3)(f) authorized and paid-u...

Section 13. Listing of securities by a securities exchange Section 13(1) No securities exchange shall admit to listing a security which has not been approved for listing by Authority . Section 13(2)(a) a public offer, on attainment of the total minimum subscription of shares as disclosed in the prospectus approved by the Authority and minimum number of shareholders prescribed for the respective market segment; Section 13(2)(b) an introduction; Section 13(2)(c) rights issues; Section 13(2)(d) scrip dividend offer; or Section 13(2)(e) capitalization of reserves. Section 13(3) A securities exchange shall provide in its listing rules and with respect to each market segment the procedure for admission to listing of securities approved for listing by the Authority . [ L.N. 32/2008 , r. 2.]

Section 14. Application for licence Section An application for a licence to operate as a stockbroker or a dealer shall be submitted to the Authority in Form 1 set out in the First Schedule.

Section 15. Specific requirements for approval Section 15(1)(a) the certificate of incorporation; Section 15(1)(b) the memorandum and articles of association; Section 15(1)(c) a statement of the un-audited accounts for the period of the accounting year ending not earlier than six months prior to the date of application and audited accounts for the preceding two years (where applicable); Section 15(1)(d) the prescribed fees set out in the Second Schedule; Section 15(1)(e) the management structure; Section 15(1)(e)(i) the management structure; Section 15(1)(e)(ii) the directors, including one or more executive directors, their qualifications, addresses and details of other directorships; Section 15(1)(e)(iii) the shareholding structure which shall disclose whether any of the shareholders will have an executive role to oversee the day to day operations of the business; Section 15(1)(e)(iv) the shareholding structure of a dealer; Section 15(1)(e)(v) the evidence of paid up share capital of a minimum amount of fifty million shillings in the case of a stockbroker and twenty million shillings in the case of a dealer; Section 15(1)(e)(vi) the qualifications, experience and expertise of the...

Section 16. Stockbrokers’ financial requirements Section 16(1) The level of shareholders’ funds (paid up share capital and reserves) for stock brokers shall not fall below fifty million shillings at any time during the license period. Section 16(2) The minimum paid-up share capital shall always be unimpaired and shall not be advanced to the directors or associates of the stockbroker. Section 16(3) A stock broker shall maintain a liquid capital of thirty million shillings or eight per cent of is total liabilities, whichever is higher. Section 16(4) Deleted byL.N. 112/2013, r. 3. Section 16(5) Deleted byL.N. 112/2013, r. 3. [ L.N. 99/2009 , r. 3, L.N. 88/2012 , r. 12, L.N. 112/2013 , r. 3.]

Section 17. Dealers’ financial requirements and investment limits Section 17(1) The level of shareholders funds (paid-up share capital and reserves) shall not be below twenty million shillings, at any time during the licence period. Section 17(2)(a) set aside investment capital of not less than twenty million shillings (except as provided under paragraph (3) ) in cash or portfolio of listed securities, or such higher amount as may be prescribed by the Authority; and Section 17(2)(b) deleted byL.N. 112/2013, r. 4. Section 17(3) Where a dealer is promoted by a stockbroker through a subsidiary, the minimum investment capital committed to dealing operations by the subsidiary shall not be less than five million shillings in cash or listed securities portfolio at market value or such higher amount as may be prescribed by the Authority . Section 17(4) A dealer shall maintain a liquid capital of thirty million shillings or eight per cent of its total liabilities, whichever is higher. Section 17(5) Deleted byL.N. 112/2013, r. 4. Section 17(6) Deleted byL.N. 112/2013, r. 4. Section 17(7) A dealer shall maintain an investment portfolio out of its investment capital equivalent to a minimum mon...

Section 18. Financial year Section The financial year of stockbrokers and dealers shall end on the 31st of December in each year. [ L.N. 112/2013 , r. 4.]

Section 19. Records to be maintained Section 19(1)(a) journals or other records of original entry containing an itemized daily record of all purchases and sales of securities, all receipts and deliveries of securities (including certificate numbers), all receipts and disbursements of cash and all debits and credits; the records shall show the account for which each transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date and the name or other designation of the person from whom the securities were purchased or received or to whom they were sold or delivered; Section 19(1)(b) ledgers, (or other records) reflecting all assets and liabilities, income, expense and capital accounts; Section 19(1)(c) detailed records of nominee accounts; Section 19(1)(d) all cheque books, bank statements, cancelled cheques and bank reconciliation accounts; Section 19(1)(e) clients’ accounts (or other records) itemizing separately each account of a client, all purchases, sales, receipts and deliveries of securities and all other debits and credits; Section 19(1)(f) a memorandum of each client’s order received for the purchase or sa...

Section 20. Client accounts Section deposit clients’ funds in one or more bank account(s), which account(s) shall contain only clients’ funds and be clearly marked “clients’ accounts”. Such client accounts shall not be overdrawn for any reason;

Section 21. Reporting obligations Section 21(1)(a) quarterly reports and accounts within fifteen days of the end of each calendar quarter; Section 21(1)(b) half yearly reports and accounts within thirty days of the end of each half year; and Section 21(1)(c) audited annual accounts within three months following the end of the stockbroker and dealer’s financial year; Section 21(1)(d) a financial statement complying with the disclosures prescribed under the Fourth Schedule of these Regulations. Section 21(2) Every stockbroker or dealer shall prepare monthly reports and accounts within fifteen days the end of each calendar month which shall be made available to the Authority at such times as the Authority may request. [ L.N. 99/2009 , r. 4, L.N. 88/2012 , r. 14.]

Section 22. Conduct of stockbrokers and dealers Section 22(1)(a) operate independently of any other stockbroker or dealer; Section 22(1)(b) conduct the business efficiently, honestly, and fairly, with the integrity and professional skills appropriate to the nature and scale of activities; Section 22(1)(c) have no formal or informal agreement with a trading participant of the same securities exchange whether through an association or not, relating to the stockbroker’s or dealer’s trading activity, personnel, commissions or any joint activity that is likely to undermine the competitiveness or fair trade practices and service to clients. Section 22(2) Without prejudice to the generality of paragraph (1) , in consideration whether a stockbroker or dealer is conducting or will conduct business efficiently, honestly and fairly, regard shall be made to the management and organizational structure, reporting principles and procedures, internal audit procedures, procedures for compliance with the securities laws and risk management policies which the stockbroker or dealer has adopted or proposes to adopt for its business. [ L.N. 88/2012 , r. 15.]

Section 23. Conduct of stockbrokers Section 23(1)(a) execute an order only where the client has made sufficient arrangements for funds or securities with the stockbroker; Section 23(1)(b) only accept written orders and shall ensure that the client is not only capable of honouring the order before acting on the order, but has made arrangements with the stockbroker for fulfilment of its obligations arising from such order; Section 23(1)(c) execute clients’ orders in the chronological sequence of orders received and which have been so recorded in accordance with these Regulations and shall give priority to orders of clients over orders of any shareholder or employee of the stockbroker or related dealer subsidiary, whether directly or indirectly; Section 23(1)(d) maintain a daily record of orders received from clients showing the name of each client, the specific order and time the order was given, and execute the same in order of receipt; Section 23(1)(e) exercise due diligence and care at all times so as not to misinform or misdirect clients; Section 23(1)(f) while accepting an order from a client, inform the client of all constituent parts of an order prior to executing the order an...

Section 24. Prohibited dealings and associations Section 24(1)(a) create a false market in any listed security by way of any artificial device including but not limited to advising clients to buy or sell a particular security while selling or buying through its dealing or related party transactions, without disclosing that fact to the investors; Section 24(1)(b) establish a corner or trade where a corner has developed in a listed security; Section 24(1)(c) negotiate on any issue relating to trading with any other person on the trading floor of the securities exchange; Section 24(1)(d) be party to any trading and price manipulative scheme or device which may directly or indirectly influence or interfere with the market price formation and fair trading process with respect to any listed security; Section 24(1)(e) make general recommendations to the public on particular securities through publications or statements; or Section 24(1)(f) sell securities which are not registered in the name of the stockbrokers’ client or central depository in the case of a depository environment. Section 24(2) For the purposes of this regulation, “a corner” shall be deemed to arise when a single interest...

Section 25. Sale of securities Section 25(1)(a) the stockbroker or dealer has or, in the case of a stockbroker, its client has; or Section 25(1)(b) the stockbroker or dealer believes on reasonable grounds, that it has, or in the case of a stockbroker, its client has, Section 25(2) A person who, at any particular time, has an existing exercisable and unconditional right to have securities vested in him or in accordance with his directions shall be deemed to have at that time a presently exercisable and unconditional right to vest the securities in another person. Section 25(3) A right of a person to vest securities in another person shall not be deemed not to be unconditional by reason only of the fact that the securities are charged or pledged in favour of another person to secure the repayment of money. Section 25(4)(a) purports to sell securities; Section 25(4)(b) offers to sell securities; Section 25(4)(c) holds himself out as entitled to sell securities; or Section 25(4)(d) instructs a stockbroker to sell securities.

Section 26. Code of conduct to be approved Section 26(1) Any proposed code of conduct or agreements to self-regulate the operations of stockbrokers and dealers, shall be submitted to the Authority for prior approval and must be consistent with these Regulations. Section 26(2) No code of conduct of any associations or agreements of stockbrokers or dealers whether in written form or not shall seek to restrict free negotiation or competition by trading participants with regard to commissions payable on any transactions as provided in the Fifth Schedule. [ L.N. 88/2012 , r. 16.]

Section 27. Payment of transaction and InvestorCompensation Fundfees Section All stockbrokers and dealers shall pay to the Authority and to the securities exchange of which they are trading participants the fees prescribed as payable by every buyer and seller of a security and shall pay to the Investor Compensation Fund the fees prescribed as payable by each buying and selling stockbroker, or dealer within fifteen days following a transaction. [ L.N. 88/2012 , r. 17.]

Section 22A. Conducting business through a stock broking agent Section 22A(1) A stockbroker may conduct business through a stockbroking agent provided the stockbroking agent has been contracted in writing to render such services. Section 22A(2) Every stockbroker shall forward to the Authority , on an annual basis, a register of any stockbroking agents contracted pursuant to paragraph (1) and shall notify the Authority of any amendment to the register of agents within five working days of such change. Section 22A(3) A stockbroker shall be responsible for conducting all necessary due diligence to establish the competence, fitness and propriety of any person so appointed as a stockbroking agent, having specific regard to the past experiences and conduct of any such person, in establishing his capacity to facilitate the purchase and sale of securities as an agent of the stockbroker in the best interests of investors. Section 22A(4) A stockbroker shall submit to the Authority for approval the standard form agency agreement they propose to enter into with their stockbroking agents and shall thereafter secure the approval of the Authority prior to amending such agreement. Section 22A(5) A...

Section 28. Application for license Section 28(1) A sole proprietor, company, partnership or limited liability partnership may apply to the Authority for a licence to operate as an investment advisor. Section 28(2) A company may apply to the Authority for a licence to operate as a fund manager. Section 28(3) An application for a license in paragraphs (1) or (2) shall be submitted to the Authority, in duplicate, in Form 1 as set out in the First Schedule. [ L.N. 67/2022 , r. 2.]

Section 29. Specific requirements for approval Section 29(1)(a) certificate of incorporation or registration; Section 29(1)(b) memorandum and articles of association in case of a company; Section 29(1)(c) a statement of the un-audited accounts for the period of the accounting year ending not earlier than six months prior to the date of application and the applicant’s audited accounts for the preceding two years (where applicable); Section 29(1)(d) the management structure; Section 29(1)(d)(i) the management structure; Section 29(1)(d)(ii) the directors, including one or more executive directors, their qualifications, addresses and details of other directorships; Section 29(1)(d)(iii) the shareholding structure, disclosing whether any of the shareholders will have an executive role to oversee the day-to-day operations of the business; Section 29(1)(d)(iv) the evidence of a minimum paid-up share capital of not less than ten million shillings for fund managers; Section 29(1)(d)(v) the qualifications, experience and expertise of the chief executive; Section 29(1)(d)(vi) the proposed management and qualifications of key personnel; Section 29(1)(d)(vii) the financial projections for thre...

Section 30. Financial requirements Section 30(1) Deleted byL.N. 67/2022, r. 4(a). Section 30(2) The level of shareholders funds (paid-up share capital and reserves) for fund managers, shall not fall below ten million shillings at any time during the licence period. Section 30(3) The paid-up share capital fund manager shall always be unimpaired and shall not be advanced to the directors or associates fund manager. Section 30(4) A fund manager shall maintain a liquid capital of five million shillings or eight per cent of its total liabilities, whichever is higher. Section 30(5) Deleted byL.N. 112/2013, r. 5. Section 30(6) Deleted byL.N. 112/2013, r. 5. Section 30(7) Deleted byL.N. 67/2022, r. 4(d). [ L.N. 112/2013 , r. 5, L.N. 67/2022 , r. 4.]

Section 31. Records to be maintained Section 31(1)(a) journals, including cash receipts and disbursement records and any other records or original entry, forming the basis of entries in any ledger; Section 31(1)(b) general and auxiliary ledgers, or other comparable records reflecting assets, liabilities, reserves, capital, income and expense accounts; Section 31(1)(c) show the terms and conditions of the order, instruction, modification or cancellation; Section 31(1)(c)(i) show the terms and conditions of the order, instruction, modification or cancellation; Section 31(1)(c)(ii) identify the person connected with the investment adviser or fund manager who recommended the transaction to the client and the person who placed such order; Section 31(1)(c)(iii) show the account for which the order was entered, the date of entry, and the stockbroker by or through whom the order was executed, where appropriate; and Section 31(1)(c)(iv) show orders entered pursuant to the exercise of discretionary power on account of management of investment portfolios in which case a record of details of such contracts with clients, constituents of the portfolio, transaction fees agreed with the client and...

Section 32. Reporting obligations Section 32(1)(a) quarterly management accounts and reports of the portfolio under its management within fifteen days of the end of each calendar quarter: Provided that every fund manager shall prepare monthly reports of the portfolio under its management within fifteen days of the end of each calendar month, which shall be made available to the Authority at such times as the Authority may require; Section 32(1)(b) half-yearly reports of the portfolio under its management within thirty days of the end of each half-year, including reports of its own financial performance; Section 32(1)(c) annual reports of the total value of the portfolio under its management including the number of clients; and Section 32(1)(d) audited annual accounts for its operations in the form prescribed in the Fourth Schedule within three months following the closure of the financial year. Section 32(2) Notwithstanding the provisions of paragraph (1) , the Authority may require such other form of financial statement as it may from time to time specify. [ L.N. 99/2009 , r. 6, L.N. 67/2022 , r. 6.]

Section 33. Conduct of investment advisers and fund managers Section 33(1)(a) recommend to a client to whom investment, supervisory, management or consulting services are provided, the purchase or sale of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client’s investment objectives, financial situation and needs, and any other information known or acquired by the investment adviser or fund manager after reasonable examination of the client’s financial records; Section 33(1)(b) place an order to purchase or sell a security for the account of a client without written authority to do so; Section 33(1)(c) place an order to purchase or sell a security for the account of a client upon instruction of a third party without first having obtained a written third-party authorization from the client; Section 33(1)(d) exercise any discretionary power in placing an order for the purchase or sale of securities for a client without obtaining written discretionary authority from the client; Section 33(1)(e) induce trading in a client’s account that is ex...

Section 34. Appointment of acustodian Section 34(1) A fund manager that manages discretionary funds shall appoint a custodian for the assets of the Fund. Section 34(2) A custodian of an investment portfolio may in relation to the fund manager be a holding company or a subsidiary company within the meaning of the terms as defined in section 154 of the Companies Act ( Cap. 486 ) or be deemed by the Authority to be otherwise under control of substantially the same persons or consist substantially of the same shareholders, provided that the investment in a related company shall be limited to ten per cent of the total funds managed by the fund manager. Section 34(3) The Authority may revoke the approval of a custodian if at any time thereafter the custodian ceases to satisfy the requirements of these Regulations. [ L.N. 67/2022 , r. 7.]

Section 35. Duties of acustodian Section 35(1)(a) taking into its custody or under its control all the property of the clients of the fund manager and hold it in trust for the clients in accordance with the provisions of the written service agreement provided that cash and registrable assets shall be registered in the name of or to the order of the clients by the custodian ; Section 35(1)(b) receiving and keeping in safe custody title documents, securities and cash amounts of the investment portfolio; Section 35(1)(c) opening an account in the name of each client for the exclusive benefit of such investment portfolio; Section 35(1)(d) transferring, exchanging or delivering in the required form and manner securities held by the custodian upon receipt of proper instructions from the investment adviser or fund manager; Section 35(1)(e) requiring from the investment adviser or fund manager as the case may be, such information as it deems necessary for the performance of its functions as a custodian ; Section 35(1)(f) promptly delivering to the fund manager or to such other persons as fund manager may authorize, copies of all notices, proxies, proxy soliciting materials received by the...

Section 36. Custodian’s records and reports Section 36(1)(a) the entire fund of the investment portfolio held by the custodian ; Section 36(1)(b) each transaction carried out by the custodian on behalf of the fund manager as the case may be. Section 36(2) The records referred to in paragraph (1) shall be subject to inspection by the fund manager as the case may be or a duly authorized agent of the Authority within the premises of the custodian at any time during business hours. Section 36(3)(a) a written statement at agreed reporting dates which lists all assets of the fund manager’s clients in the clients’ account(s) together with a full account of all receipts and payments made and other actions taken by the custodian ; Section 36(3)(b) an advice or notification of any transfers of property or securities to or from the fund managers clients’ account(s) and indicating the securities acquired for the account(s), the identity of the party having physical possession of such securities; and Section 36(3)(c) a copy of the most recent audited financial statements of the custodian prepared together with such information regarding the policies and procedures of the custodian as the invest...

Section 37. Retirement of acustodian Section 37(1) A custodian shall not retire voluntarily except upon the appointment of a successor approved by the Authority . Section 37(2) Where a custodian desires to retire or ceases to be registered as a custodian with the Authority , the investment adviser or the fund manager as the case may be may with the approval of the Authority appoint another eligible person to be a custodian in its place.

Section 38. Removal of acustodian Section 38(1)(a) the custodian goes into liquidation other than a voluntary liquidation for the purpose of reconstruction or amalgamation or where a statutory manager or a receiver is appointed over any of its assets; Section 38(1)(b) the custodian ceases to be an authorized depository or ceases to carry on business as a bank or financial institution; Section 38(1)(c) the custodian fails or neglects after reasonable notice from the investment adviser or fund manager, to carry out or satisfy any duty imposed on the custodian in accordance with the agreement; or Section 38(1)(d) the directors of the investment adviser or fund manager as the case may be, by extraordinary resolution resolve that such notice be given, and the investment adviser or fund manager with the approval of the Authority appoints as custodian some other qualified authorized depository. Section 38(2) On receipt of the notice referred to in paragraph (1) by the investment adviser or the fund manager, the service agreement between investment adviser or the fund manager as the case may be and the custodian shall be deemed to have been terminated. Section 38(3) In the event of a termi...

Section 62. Disqualification of professionals Section disqualify any person from giving professional opinion on matters related to listed securities, public offer or issue of securities; or

Section 63. Content of public communication and circular to shareholders Section 63(1)(a) assisting in the evaluation of a particular security, or type of securities; Section 63(1)(b) promoting the industry, the service offered or the desirability of investing in securities in general; or Section 63(1)(c) providing shareholders or the public with accurate and adequate information about the listed company or securities transaction and market activity. Section 63(2) No material fact or qualification may be omitted if such omission would cause a shareholders’ circular, advertisement or offer document to be misleading in the context of other information presented to the shareholders, investors or the general public. Section 63(3)(a) disclose the price at the time of the recommendation and, if applicable, the fact that such licensed person or analyst makes a market in the securities recommended (where applicable); Section 63(3)(b) recommend a buy or sell action and shall disclose the basic facts and assumptions in support of such recommendation and whether the licensed person or analyst or person associated to it owns more than a nominal amount of such securities; Section 63(3)(c) highl...

Section 39. Application for licence and specific requirements for approval Section 39(1) An application for a licence to operate as an investment bank shall be submitted to the Authority in Form 1 set out in the First Schedule. Section 39(2)(a) the certificate of incorporation; Section 39(2)(b) the memorandum and articles of association; Section 39(2)(c) a statement of the un-audited accounts for the period of the accounting year ending not earlier than six months prior to the date of application and applicant’s audited accounts for the preceding two years (where applicable); Section 39(2)(d) management and shareholding structure of the investment bank; Section 39(2)(d)(i) management and shareholding structure of the investment bank; Section 39(2)(d)(ii) directors, including their qualifications, addresses and details of other directorships; Section 39(2)(d)(iii) evidence of paid up share capital of a minimum amount of two hundred and fifty million shillings; Section 39(2)(d)(iv) qualifications, experience and expertise of the chief executive and dealers that must be relevant to effectively manage or operate the business of an investment bank; Section 39(2)(d)(v) proposed operating...

Section 40. Authorized functions Section public offering of securities;

Section 41. Admission to a securities exchange Section A person licensed by the Authority as an investment bank shall be eligible to apply for admission as a trading participant with a securities exchange: Provided that the licensed investment bank complies with the eligibility requirements of the admitting securities exchange. [ L.N. 88/2012 , r. 19.]

Section 42.[Deleted byL.N. 88/2012, r. 20.]

Section 43. Conduct of investment banks Section An investment bank shall comply with the provisions on client accounts, records to be maintained, reporting obligations, conduct, prohibited dealings and associations, investment requirements and appointment of custodian , relating to stockbrokers, broking agents, dealers, investment advisers and fund managers and payment of transaction and investor compensation fees relating to stockbrokers, stockbroking agents and dealers as set out in these Regulations, where applicable. [ L.N. 99/2009 , r. 8.]

Section 44. Financial requirements Section 44(1) The level of paid-up share capital shall not fall below two hundred and fifty million shillings at any time during the licence period and in addition, shareholders’ funds (paid up share capital and Reserves) shall at no time fall below two hundred and fifty million shillings: Provided that any investment bank whose paid-up share capital is below the required amount at the time of commencement of this paragraph shall comply by the 31st December 2010. Section 44(2) The minimum paid-up share capital shall always be unimpaired and shall not be advanced to the directors or associates of the investment bank. Section 44(3) Deleted byL.N. 112/2013, r. 6. Section 44(4) An investment bank shall maintain a liquid capital of thirty million or eight per cent of its total liabilities, whichever is higher. Section 44(5) Deleted byL.N. 112/2013, r. 6. [ L.N. 99/2009 , r. 9, L.N. 88/2012 , r. 21, L.N. 112/2013 , r. 6.]

Section 45. Application for licence Section 45(1) An application for a licence to operate as an authorized securities dealer shall be submitted to the Authority in Form 1 set out in the First Schedule. Section 45(2)(a) a bank licensed under the Banking Act ( Cap. 488 ); Section 45(2)(b) an investment bank or a fund manager; Section 45(2)(c) an insurance company licensed under the Insurance Act ( Cap. 487 ); or Section 45(2)(d) any other person who meets the requirements of this Part and approved by the Authority , Section 45(3) An applicant under paragraph (2) shall demonstrate effective capacity and expertise in dealing in securities. Section 45(4) An authorized securities dealer who intends to be admitted as a trading participant at a securities exchange shall submit a letter from the securities exchange, which the applicant is seeking admission to as a trading participant, confirming that applicant shall be admitted into the securities exchange upon securing a license from the Authority . [ L.N. 88/2012 , r. 22, L.N. 112/2013 , r. 7.]

Section 46. Specific requirements for approval Section the certificate of incorporation;

Section 47.[Deleted byL.N. 112/2013, r. 9.]