Co-authored by Clifford Odhiambo
Capital Markets Authority
The Finance Act, 2016 (the Finance Act) has amended the Capital Markets Act ((Cap. 485A) the Capital Markets Act), in a bid to facilitate the issuance of regulations to govern online foreign exchange trading and to bolster the legal framework for the country’s first commodities exchange. The Capital Markets Act now includes a definition of online forex broker under Section 2. Furthermore, Section 12 has been amended to enhance the Cabinet Secretary’s powers to make rules and regulations on disclosures in securities transactions that relate to online forex trading activities and online forex brokers, among others. The term commodities exchange has been inserted immediately after the term securities exchange in Sections 19, 19A, 20, 21, 22A and 23 of the Capital Markets Act, thereby making the regulation of the commodities exchange substantially similar to that of the securities exchange. In keeping with this objective, Section 25A (1) has been amended by inserting the words commodities or derivatives immediately after the word securities wherever it appears in the said section.
Banking Act, Cap. 488
In addition, the Finance Act has amended Section 31 of the Banking Act ((Cap. 488) the Banking Act) which regulates the publication of information to allow the institutions licensed under the Sacco Societies Act, 2008; public utility companies and any other institution mandated to share credit information to exchange such information on non-performing loans as may be specified by the Central Bank of Kenya (CBK) in its guidelines. By virtue of amendments to Section 34(2) of the Banking Act, the CBK is now required to consult with the Cabinet Secretary before exercising its powers to intervene in the management of a financial institution. The said section has been amended by inserting the words in consultation with the Cabinet Secretary immediately after the phrases, Central Bank may.
Moreover, stiffer penalties for failure to comply with any directions of the CBK under the Banking Act or the Prudential Guidelines have been introduced in the amendments to Section 55(2) of the Banking Act as follows:
- In the case of an institution or credit reference bureau, the fine has been revised to KES 20 million from the previous KES 5 million;
- The case of a natural person, the fine has been revised to KES 1 million from the previous KES 200,000; and
- In each case for each day or part thereof during which such failure subsists, the additional fine has been revised from KES 20,000 to KES 100,000.
In case of any queries in respect of these developments, please contact our lawyer (listed below) or your main contact at our firm.