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CMA Tightens Grip on Market Intermediaries with Increased Capital Requirements

The Capital Markets Authority (CMA) is shaking things up in Kenya’s financial sector with proposed new regulations that raise the bar for market intermediaries. This move, aimed at boosting investor confidence and revamping the market as a whole, requires these intermediaries to hold a higher minimum amount of readily available cash and liquid assets.

Investment Banks Feel the Squeeze: Previously content with a minimum of Sh30 million, investment banks will now be required to hold at least Sh50 million in liquid capital. This new threshold could force some consolidation within the sector, with smaller players potentially merging or exiting the market altogether.

Fund Managers Double Down: Fund managers won’t be spared either. Their minimum liquid capital requirement has been doubled from Sh5 million to Sh10 million, ensuring they have a more robust financial cushion to manage client investments.

New Kids on the Block Get Schooled: Previously exempt from such requirements, several intermediaries like broker-dealers, forex brokers, money managers, and REIT managers will now face new capital thresholds. Broker-dealers, who act as both client representatives and independent traders, will need a hefty Sh50 million, while online forex brokers will require Sh30 million. Even money managers, trustees, custodians, and REIT managers won’t escape the new rules, with a minimum of Sh5 million in liquid capital becoming mandatory.

Why the Shakeup? The CMA’s goal is clear: a more stable and secure financial market. By requiring intermediaries to hold more readily available cash, they aim to mitigate potential risks and ensure these institutions have the resources to weather any financial storms. This, in turn, could instill greater confidence among investors, potentially attracting new players and capital into the Kenyan market.

Public Weighs In: The CMA has opened the floor for public participation on these proposals, giving stakeholders a chance to voice their opinions before the regulations are finalized. Whether these new requirements will create a more secure environment or stifle innovation in the market remains to be seen. One thing’s for sure: the Kenyan financial landscape is about to get a significant makeover.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

14th March, 2024

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