May 5, 2016 May 5, 2016

1. Reporting obligations for  Investment banks,  Stockbrokers and dealers  FM and Investment advisers 2. Publication financial statements 3. Capitalization and liquid capital requirements 4. Financial Resource Requirements (FRR) 5. Other reporting obligations 2

3  Regulation 21 (1) of the Capital Markets (Licensing Requirements) (General) Regulations 2002 :

 Regulation 32 (1) of the Capital Markets (Licensing Requirements) (General) Regulations 2002 : 4

 Regulation 51A of the Capital Markets (Licensing Requirements) (General) Regulations 2002 states that CIS, SB, dealers, FM & IB shall publish in at least two daily newspapers of national circulation 5

 Stockbrokers & Investment banks – PI insurance of not less than 5 times daily average turnover for the previous year  Fund managers- as the Authority may determine based on the portfolio under management 6

7 LicenseeCapitalization requirement (paid up and shareholders funds) Liquid capital requirement Investment BanksKshs 250 millionKshs 30 million or 8% of total liabilities whichever is higher StockbrokersKshs 50 millionKshs 30 million or 8% of total liabilities whichever is higher Fund ManagersKshs 10 millionKshs 5 million or 8% of total liabilities whichever is higher Investment AdvisersKshs 2.5 millionKshs 1 million or 8% of total liabilities whichever is higher DealersKshs 20 millionKshs 30 million or 8% of total liabilities whichever is higher

 Monthly returns - To the Authority not later than 15 days after the end of each month Section 45 (1) of the FRR Guidelines for Market Intermediaries which anchored the RBS.  Notify the Authority within one day or reasonably practical, if you become aware of: Liquid capital falls below 120% of the required LC falls below 50% of the liquid capital of the previous return; and Any false information submitted to the Authority. 8

9 RequirementTimeline Appointment and removal of an external auditors All licensed persons require written approval of the Authority at least one month prior to such appointment or removal. Changes of key staff Every licensee shall lodge with the Authority in every year and update the same within five days of any change thereto, a list of all key personnel working with the licensee which shall include the individual’s full name & other details as in the law Change of shareholders Any person licensed by the Authority shall not change its shareholders, directors, chief executive or key personnel except with the prior confirmation, in writing, by the Authority that it has no objection to the proposed change and subject to compliance with any conditions imposed by the Authority. Change to capital structure Every licensed person shall notify the Authority of any changes to its capital structure within five working days from the date of the change. Change of office locationA licensed person shall not open a branch or a new place of business in Kenya, or change the location of a branch or existing place of business, without the approval of the Authority.

 The auditor of a licensed person or approved person is required to report the following matters immediately to the Authority:  A serious breach of or non-compliance with the provisions of the Act or the Regulations, made thereunder, guidelines or other stipulations of the Authority  A criminal offence involving fraud or other dishonesty committed by the licensed person or any of its key officers or employees  Serious irregularities which may jeopardize the security of investors or creditors of the licensed person  He is unable to confirm that the claims of investors and creditors of the licensed person are capable of being met out of the assets of the licensed person.  Written notice to the Authority where he includes in his report or draft report on the licensed or approved person’s accounts any qualification which did not appear in the accounts for the preceding financial year. 10

 The Board of a market intermediary shall be composed of:  A minimum of 3 directors of whom at least 2 shall be natural persons;  At least 1 independent non–executive director;  Not more than 1 third of the directors who are close relations of any director;  A person shall not be a director in more than two market intermediaries unless the market intermediaries are subsidiaries or holding companies.  A market intermediary shall  not appoint a person to be a director unless that person is fit and proper to hold such position; and is a certified director from an institution recognized by the Authority.  keep a register of its directors and avail the register for inspection by the public, without any charge, at its registered office.  The board shall meet at least once in every three calendar months to review the market intermediary’s processes and procedures to ensure the effectiveness of its internal systems of control.  The board shall, prepare an annual schedule of meetings of the market intermediary. 11

 The board shall establish an audit committee and such other committees, as it considers necessary and specify their terms of reference, in writing, including the reporting procedures and a written scope of authority.  The chief finance officer or any other person who is responsible for finance department of a market intermediary and the person responsible for the internal audit function, shall be members ICPAK (CPA-K).  Market intermediary shall establish an effective internal audit function. The internal auditor shall not be the compliance officer and shall not be involved in any function that is being audited.  The board shall appoint a risk management officer to assist the board in the discharge of its duties relating to corporate accountability and risk management, assurance and reporting.  The board shall, annually, review its risk management procedures and contingency plans, and document the results and conclusions of such reviews.  The board shall appoint a compliance officer who shall monitor compliance with the regulatory requirements prescribed by the Authority, and shall not be involved with any function that is the subject of compliance. 12

 Various initiatives which have been implemented at the Authority level: Online portal for submission; Relationship management to enhance interactions with market intermediaries; Open discussions, workshops; and External user segmentation for purposes of smooth communication. 13

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