The Capital Markets Authority of Kenya has ordered market intermediaries to stop offering a popular investment product known as the Cash Management Solutions (CMS) & asked them to refund Cash to investors by 15th November.
The CMS is a product whereby a firm mobilizes deposits from various investors and then approaches banks to negotiate higher rates which are above what the market offers, the firm then shares the returns with the depositors according to the agreed terms.
The authority says that fund managers/ market players offering this product are acting like banks or micro finances, an activity which they are not licensed to carry out according to the interpretation of the section 2(1) of the banking act and section 2 of the micro-finance act.
“The authority notes continuos increase of cash management solutions/products being arranged or facilitated by various capital market intermediaries. The mode of operation of CMS/P is noted to be such that provision of the service is excluded from the ambit of the Capital Market Act and therefore constitutes unregulated activity.” Reads a notice sent to all market intermediaries by the CMA.
“Products related to CMS/P would be deemed to constitute to banking or micro-finance business.” says CMA noting that this product is unregulated and urges market participants to be transparent in their operations.
This order is expected to hit various licenced fund managers including Britam Kenya but its unknown whether other unregulated firms will be affected.
