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Capital Markets Authority (CMA)

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Capital Markets Authority (CMA)

Mission statement:

To facilitate the development of orderly, fair, & efficient capital markets in Kenya through effective regulation that encourages innovation & safeguard market integrity.

Overview:

Objectives

   *      The principle objectives of the Authority are:
     The development of all aspects of the capital markets with particular emphasis on the removal of impediments to, and the creation of incentives for longer term investments in, productive activities;
   *      To facilitate the existence of a nationwide system of stock market and brokerage services so as to enable wider participation of the general public in stock market;
   *      To create, maintain and regulate a market in which securities can be issued and traded in an orderly, fair, and efficient manner, through the implementation of a system in which the market participants regulate themselves to the maximum practicable extent;
   *      To protect investor interests;
   *      To operate a compensation fund to protect investors from financial loss arising from the failure of a licensed broker or dealer to meet his contractual obligations; and
   *      To develop a framework to facilitate the use of electronic commerce for the development of capital markets in Kenya

Vision:

To be a trusted and professional regulator and promoter of deep and vibrant capital markets in Kenya.

History:

The capital market is part of the financial system that provides funds for long-term development. This is a market that brings together lenders (investors) of capital and borrowers (companies that sell securities to the public) of capital.

Establishment of the Capital Markets Authority

In the 1980s the Government of Kenya realized the need to design and implement policy reforms to foster sustainable economic development with an efficient and stable financial system. In particular, it set out to enhance the role of the private sector in the economy, reduce the demands of public enterprises on the exchequer, rationalize the operations of the public enterprise sector to broaden the base of ownership and enhance capital market development. It had become evident that the commercial banks could not support and sustain a desirable economic development because they could not offer the necessary long-term credit.

In 1984, a study on the Development of Money and Capital Markets in Kenya was jointly undertaken by the Central Bank of Kenya and the International Finance Corporation with the objectives of making recommendations on measures that would ensure active development and strengthening of the financial sector. This became a blueprint for structural reforms in the financial markets. The Government further re-affirmed its commitment to the creation of a regulatory body for the capital markets in the 1986 Sessional Paper on “Economic Management of Renewed Growth”.
In November 1988, the Government set up Capital Markets Development Advisory Council and charged it with the role of working out the necessary modalities including the drafting of a bill to establish the Capital Markets Authority (the Authority).
In November1989, the bill was passed in parliament and subsequently received Presidential assent (The Capital Markets Authority was set up in 1989 through an Act Parliament (Cap 485A,Laws of Kenya). The Authority was eventually constituted in January 1990 and inaugurated on 7th March 1990. The Authority is a body corporate with perpetual succession and a common seal.

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