What Every Kenyan Investor Should Know in 2025
A practical guide to the CMA’s legal framework, investor protections, and market rules
The Capital Markets Act is the backbone of Kenya’s financial markets. It empowers the Capital Markets Authority (CMA) to regulate, license, and supervise all players in the securities industry—from stockbrokers and fund managers to listed companies and crowdfunding platforms.
Let’s break it down into what matters most for investors today.
1. What the Capital Markets Act Does
The Act establishes the Capital Markets Authority (CMA) and gives it powers to:
- License and regulate market intermediaries (e.g. brokers, investment banks, fund managers)
- Approve public offers, listings, and securities issuances
- Enforce disclosure rules for listed companies and issuers
- Protect investors through surveillance, investigations, and penalties
- Promote innovation via regulatory sandboxes and fintech frameworks
It applies to all securities markets in Kenya, including the Nairobi Securities Exchange (NSE), derivatives markets, REITs, and crowdfunding platforms.
2. What Counts as a “Security” in 2025
Under the Act, a security includes:
- Shares, bonds, and debentures
- Collective investment schemes (unit trusts, REITs, ETFs)
- Derivatives (futures, options, swaps)
- Asset-backed securities
- Digital assets (pending final approval of the 2023–2025 Capital Markets Amendment Bill)
This broad definition ensures that both traditional and emerging investment products fall under CMA oversight.
3. Disclosure Rules for Issuers
If a company wants to raise money from the public—through an IPO, bond, or crowdfunding—it must comply with strict disclosure rules:
- Prospectus: Must be approved by CMA and include financials, risks, use of funds, and governance
- Ongoing disclosures: Listed companies must publish audited results, profit warnings, and material changes
- Insider trading rules: Directors and insiders must disclose trades and avoid market manipulation
Failure to disclose material information can lead to fines, suspension, or delisting.
4. Licensing and Conduct of Market Intermediaries
The Act requires all intermediaries to be licensed by CMA, including:
- Stockbrokers and dealers
- Investment banks and fund managers
- Custodians and trustees
- Credit rating agencies
- Online forex and derivatives brokers
They must meet capital adequacy, fit-and-proper, and corporate governance standards. Misconduct—like front-running, mis-selling, or misuse of client funds—can lead to license revocation and criminal prosecution.
5. Penalties and Enforcement Powers
CMA has wide-ranging powers to enforce the Act:
- Administrative sanctions: Fines, license suspension, cease-and-desist orders
- Criminal prosecution: For fraud, insider trading, or market manipulation
- Investor compensation: Through the Investor Compensation Fund (ICF)
- Whistleblower protections: Under the Capital Markets (Whistleblower) Regulations, 2022
In 2024 alone, CMA issued over KSh 120 million in fines and suspended 3 intermediaries for misconduct.
6. What’s New in 2025
- Derivatives Market (Amendment) Regulations, 2025: Updated rules for margining, clearing, and risk management in the NSE derivatives market
- Digital Assets Bill: Proposes to classify cryptocurrencies and tokenized assets as securities, bringing them under CMA regulation
- Green Finance Guidelines: Issuers of green bonds and ESG-linked securities must meet new disclosure and impact reporting standards
- Crowdfunding Rules: Platforms must now register with CMA and meet investor protection thresholds
Final Word
The Capital Markets Act isn’t just legal jargon—it’s your shield as an investor. It ensures that companies tell the truth, brokers play fair, and your money is protected. In 2025, with new products like ETFs, REITs, and digital assets gaining traction, understanding this law is more important than ever.
