The Capital Markets Authority(CMA) will, from July this year, license more players to act as investment advisors.
This is as soon as proposals to amend the CMA Act (Cap. 485A), as contained in the Finance Bill 2022, is passed by Parliament. These amends to the CMA will be effective from 1st July 2022.
“To enable more investment advisors to offer investment advisory services, I propose to amend the Capital Markets Act to expand the spectrum of persons who can act as investment advisors. This will allow single director companies and partnerships to be licensed as investment advisors,” said Ukur Yatani, Treasury Cabinet Secretary, while presenting Kenya’s 2022/23 budget estimates to parliament.
Data from CMA shows 17 licensed investment advisors at the end of 31st December 2021.
The Bill seeks to amend the Capital Markets Act to address the shortage of investment advisory services experienced in Kenya due to the restrictive nature of the Act.
The Finance Bill 2022 must be tabled in Parliament before April 30th, 2022, so that legislators have adequate time to debate and pass it before their term expires.
A licensed Investment Advisor offers advisory services for debt issues, commercial paper and corporate bond transactions; corporate advisory (for capital markets and private companies); equity raising (private placements and public listings); strategic advisory services and real estate and property advisory services.
The licensee can also undertake due diligence and business valuations as well as prepare feasibility studies.
An investment advisor is a person or group licensed under the Capital Markets Act to make investment recommendations or conduct securities analysis in return for a fee, whether through direct management of a client’s assets or through written publications.
An investment adviser is a market professional who undertakes analysis and research on capital markets securities and advises investors on such securities at a commission.
At present, a licensed investment advisor must be incorporated as a company with a paid-up share capital of not less than KSh 2.5 Million.
The working capital of an investment adviser shall not be below 20% of the prescribed minimum shareholders’ funds; unsecured advances, loans and other amounts to directors or associates shall not exceed 10% of prescribed shareholders’ funds at any time.
As prescribed, the aggregate maximum value of all clients’ portfolios managed under the investment adviser’s license shall not exceed KSh 10 Million.