Parliament has passed legislation to remove long-standing statutory ownership caps on capital markets firms, a regulatory shift designed to attract larger investors and accelerate the sector's growth.
- •The Capital Markets (Amendment) Bill, 2025, which now awaits presidential assent, repeals fixed limits that barred any single investor from holding more than one-third of entities such as investment banks, stockbrokers, fund managers, and derivatives brokers.
- •The new law transfers authority for setting future shareholding thresholds to the Cabinet Secretary, who will act in consultation with the Capital Markets Authority (CMA).
- •The reform clears the way for potential market consolidation, as larger local and foreign investors can now take controlling stakes in intermediaries, particularly those seeking recapitalization.
Repeal of Fixed Limits
The amendments delete subsections 29(4) to 29(7) of the Capital Markets Act, eliminating a rigid framework that included:
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A 33.33% cap on shareholding, board appointments, and dividend entitlements.
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A rule prohibiting anyone controlling more than 25% of a firm from serving as key personnel.
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Specific control tests used by the regulator.
The repealed sections also contained exemptions for corporate entities already licensed by financial regulators in Kenya or elsewhere, and for shareholders with a diverse ownership structure.
The deleted provisions are replaced by a new subsection, 29(3A), which authorizes the Cabinet Secretary to "make Regulations prescribing the shareholding limits for different categories of business."
This moves Kenya from a one-size-fits-all model to a flexible system where ownership thresholds can be tailored by licensee category and risk profile. According to the Bill's Memorandum of Objects and Reasons, the changes aim to "enhance ease of doing business" and "streamline regulation" to facilitate "efficient and responsive adjustments."
The change creates immediate pressure for the Treasury and CMA to issue clear regulations, as the statutory limits will be void upon the Bill's enactment. The government has stated that the success of the reform hinges on this new, more flexible approach attracting strategic capital that was previously restricted.
Core licensing and governance rules under Section 29(1) remain unchanged. Firms must still be of a prescribed legal type, have at least one qualified director or CEO, maintain adequate administrative capacity, and adhere to specific mandates, such as stockbrokers acting solely for clients.
