The Capital Markets Authority is seeking stakeholder views on draft regulations that will address emerging issues and needs of the investors involved with Collective Investment Schemes(CIS).
This is happening when the Authority is embroiled in legal battles with entities that are operating unregulated Collective Investment Schemes, apparently taking advantage of loopholes in the law.
CMA has two draft regulations
The Authority has thus developed two draft regulations- Capital Markets (Collective Investment Schemes) Regulations, 2021 and the Capital Markets (Collective Investment Schemes) (Alternative Investment Funds) Regulations, 2021.
These two draft rules are geared towards enhancing the legal form and structure of the CIS and segregation and protection of client assets, improvement of disclosure, asset valuation, pricing, and redemption of units.
CMA argues that market dynamics in the CIS operating environment have changed since the current regulations- Capital Markets (Collective Investment Schemes- CIS) Regulations, 2001 were developed more than two decades ago.
These draft regulations have been developed according to Section 12 of the Capital Markets Act.
Under Section 12A (3) of the Act, the Authority now invites stakeholders and the general public to submit comments on the proposed Capital Markets (Collective Investment Schemes) Regulations, 2021 and the Capital Markets (Collective Investment Schemes) (Alternative Investment Funds) Regulations, 2021, available on www.cma.or.ke
These comments must be submitted by 24th September 2021 to Capital Markets Authority’s Chief Executive through Email: [email protected]
The Draft Capital Markets( Collective Investment Schemes) Regulations 2021 defines CIS as an arrangement or scheme, in whatever form including a unit trust, an investment company, a closed-end investment fund or a savings club where members of the public are invited or permitted to invest money or other assets in a portfolio.
An application to operate a CIS should be made to the Authority by a licensed person who may be the fund manager or investment bank.
This will be accompanied by the scheme’s constitutive documents, information memorandum or placement document; the name of the fund manager, particulars of the directors of the fund manager or investment company, corporate name and registered principal office of the fund manager, trustee or depositary of the scheme; business plan; and a risk management policy.
The Authority will require a CIS to provide critical investor information so that they can reasonably understand the nature and the risks of the investment product that is being offered to them.
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