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Kenyan Capital Markets Authority Rolls Out New Rules To Allow SMEs Go On IPO

May 5, 2022

Kenya’s financial markets regulator, the Capital Markets Authority (CMA), has announced the development of new guidelines aimed at increasing listings on the Nairobi Securities Exchange (NSE), particularly by small and medium-sized enterprises (SMEs), as the bourse enters its sixth year without an IPO (IPO).

The draft Regulations are a review of the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations (POLD), 2001, and attempt to address new concerns and market dynamics in order to better serve issuers and investors. Additionally, they attempt to facilitate Small and Medium-Sized Enterprises’ (SME) access to capital markets for the purpose of raising both equity and loan financing.

Mr. Wyckliffe Shamiah, Chief Executive Officer of the CMA, stated that “the review of the POLD Regulations is consistent with the third Medium Term Plan (2018–2023) of the Vision 2030 Economic Blueprint by creating a conducive legal framework to support capital market financing of flagship projects.” Additionally, the Capital Market Master Plan (2014–2023) recommended that legislation be reviewed to streamline listing requirements and promote capital raising and listing on the NSE”.

Mr. Shamiah explained that the assessment is a critical first step toward aligning the legal framework with market realities, including technological advancements that have altered the way markets operate, including capital raising business models. Additionally, it tackles approval turnaround times, shelf registration, and security valuation, as well as other shortcomings in the present POLD Regulations.

“The draft Capital Markets (Public Offers and Listing of Securities) Regulations, 2022 (the draft Regulations) establish guiding principles for the establishment of fair, efficient, and transparent capital markets by encouraging and promoting timely and accurate disclosure of information to investors,” the CMA Chief Executive Officer stated. Additionally, they include provisions for investor protection and increased investor confidence in financial markets, among other guiding concepts”.

Additionally, the proposed Regulations created two new market segments: the SME Fixed Income Securities Market Segment (SME FISMS) and the Small and Medium Enterprises Market Segment (SMEMS). SME FISMS is a market sector for debt securities having an initial offer size of less than Ksh250 million or a CMA-defined value. The SMEMS is a market segment dedicated to the listing of SMES’s non-debt securities.

Additionally, Special Purpose Acquisition Vehicles (SPACS) were introduced. SPACs are issuers formed for the purpose of raising capital via an initial public offering by acquiring another business, which becomes the resulting issuer. The resulting issuer should have a distinct core business and provide shareholders with adequate returns on equity capital utilized.

Electronic offers of securities have been developed in recognition of technological improvements, taking into account the usage of the internet or other electronic/automated means. This is applicable to offers in which investors subscribe electronically or in which applications and allotments are processed and finalized electronically.

To further protect investors, the proposed Regulations apply to all offerings of securities to the public in Kenya, regardless of whether the issuer seeks listing on any Kenyan securities market. Additionally, they regulate the public offering of securities and private placements of securities, as well as the eligibility conditions for securities issuance.

Even if an issuer does not seek to list their securities on a securities exchange, they must nevertheless meet the eligibility criteria and adhere to the disclosure requirements. A private offer’s issuer shall not make any public advertisement or use any media or agents to tell the general public about the offer.

Restricted public offers, defined as those restricted to sophisticated investors or those communicated directly to no more than 250 explicitly selected persons in conformity with the Capital Markets Act, were also introduced. Additionally, the green shoe option and shelf prospectus have been included to accommodate an issuer’s reserved right to allot up to a defined number of securities in excess of the quantity stated for a particular offer. Shelf prospectuses are intended for distribution in the event of a restricted offering of securities.

Access the draft regulations here: https://bit.ly/3OTCq5H #capitalmarkets

Kenya SMEs capital markets Kenya SMEs capital markets

Africa-focused VC HAVAÍC Raises $20m To Invest In African Startups

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh

Kenya Admits Blockchain And Foreign-stock-trading Startups Into Sandbox Regime

May 17, 2021

Kenya is never leaving its growing startup ecosystem behind, including in its capital markets. Since the launch of the country’s record-breaking regulatory sandbox licensing regime in March 2019, the Capital Markets Authority (CMA) has admitted seven companies into the scheme. The Regulatory Sandbox Policy Guidance Note (Regulatory Sandbox PGN) which was approved in March 2019 is part of CMA’s strategic focus to leverage technology across the capital markets value chain, as espoused in its 2018–2023 Strategic Plan. The CMA has also launched a report studying the performance of the sandbox regime so far.

*CMA Chief Executive, Wyckliffe Shamiah*

“The Authority’s commitment to the introduction of the sandbox is aligned to the Capital Market Master Plan (CMMP, 2014–2023) which identiﬁes technological innovation as one of the five centres of excellence of the Kenyan capital markets,” The CMA Chief Executive, Wyckliffe Shamiah said.

Here Is What You Need To Know

Pezesha Africa, Innova Limited, Genghis Capital Limited, the Central Depository and Settlement Corporation (CDSC), Pyypl Group Limited, Belrium Kenya Limited, and Four Front Management are among the companies that have been admitted to the Regulatory Sandbox.

The CMA has received 24 applications in the areas of robo-advisory, blockchain technology, real estate tokenization, global stock access, crowdfunding platforms, Electronic Know Your Customer platform, Screen-Based Security Lending and Borrowing platform, Regtech solutions, and Data Analytics.

CMA’s keen interest in proactively reviewing its supervisory and regulatory model to take into account the fast-changing environment across the capital markets’ product and service architecture, technology, and supervision was noted by Shamiah, who launched the CMA Regulatory Sandbox Study.

“CMA has been at the forefront of implementing initiatives to stimulate and support the growth of FinTech and innovation within Kenya’s capital markets,” Shamiah said.
Read also:Africa’s Digital Payments Race Becomes a Scramble

“In line with its facilitative role, the Authority seeks to provide a conducive regulatory environment for the deployment of innovative FinTech and business models that have the potential to deepen capital markets in Kenya,” she added.

Crypto projects granted approval for regulatory sandbox testing in South Africa — *In simple terms, this is how a regulatory sandbox works. Image credits:* *LinkedIn*

The report highlights some of the main achievements, including SMEs receiving funding through Pezesha Limited’s crowdfunding platform.

It also goes into the core lessons learned by the sandbox review committee, as well as the opportunities found so far and how they will be implemented to improve future sandbox engagements.

*How to apply to the regulatory sandbox license in Kenya. Source: CMA*

The Authority has also gathered information to aid in the implementation of a Fintech-friendly regulatory system. CMA has also been pursuing collaborations with key stakeholders, which are important catalysts for the capital markets’ growth and development.

South Africa Grants Four Crypto Projects Approval For Sandbox Testing

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer