The National Treasury has given the Capital Markets Authority (CMA) powers to oversee all investment funds formally solicited from the public. In the new regulations published by the treasury, they said the move is a bid to rein in fraudulent and unregulated schemes where unsuspecting Kenyans lose billions of shillings.
The regulator attributed this grey area to a proliferation of private entities, some of which ended up defrauding Kenyans of billions of shillings as currently, people raising money privately only need to notify the CMA that they had arranged a private placement.
“We want to regulate all funds done through formal channels in the view of changes in the market environment and to address the trends where some were unscrupulous,” CMA in a statement.
Under new regulations, no one will collect funds from the public and make investments without approval and frequent checks by the CMA. They will regulate both collective investment schemes and alternative investment funds for private entities.
All private funds are expected to maintain a minimum capital of Kes 10 million and are limited to just 20 investors at any one time.
However, investors with more than Kes 1 million, who the regulator considers sophisticated enough, will be allowed into alternative funds with a higher risk appetite while also diversifying the asset classes available for investors in the country.
Additionally, for collective investment funds (CIS) where small savers with as little as Kes 5,000 pool funds for investment will be overseen by a licensed fund manager and custodian as well as a trustee.
The CIS rules bring all pooled funds under its jurisdiction unless regulated elsewhere like pension schemes or those specifically stated under the Act such as family trusts.
However, the CMA has dispelled claims that it would like to regulate everyone, including chamas, saying those are informal channels and only seek to regulate firms that collect funds through formal channels.
The move comes after Parliament summoned the treasury to explain how Kenyans are increasingly losing money to investment funds on its watch.
The CMA reported that Kenyans have lost over Kes 1 billion through unregulated investment products sold to unsuspecting investors with the hope of high returns of up to 20 per cent.