NSE Orders Pre-Clearance Before Large Share Purchases

The Nairobi Securities Exchange (NSE) has issued a compliance circular directing all investors and intermediaries to obtain written pre-clearance prior to undertaking transactions that could result in shareholding positions approaching the statutory limits.

• •The directive is grounded in the Capital Markets (Nairobi Securities Exchange Limited Shareholding) Regulations, 2016 which reinforces ownership caps designed to prevent concentrated control of the Exchange.
• •The law applies a look-through principle, meaning ownership is measured at the level of the ultimate beneficial owner, not the nominee or custodial account appearing on the share register.
• •Regulation 4 allows the Capital Markets Authority to grant exemptions if exceeding the threshold is determined to be in the public interest and the shareholder is certified as fit and proper.

“Investors and intermediaries are required to seek pre-clearance from the Exchange prior to undertaking any transaction that may result in shareholding levels approaching or exceeding the prescribed limits. Written confirmation must be obtained before execution.”

The circular states

It further instructs brokers and custodians to verify beneficial ownership before processing trades and notes that “failure to comply may result in regulatory action.”

Shareholding Limits Under Regulation 3 (Legal Notice No. 74 of 2016):

The regulations also address attempts to bypass limits. The rules also apply to holders acting in concert, capturing formal or informal cooperation intended to obtain or consolidate control.

A shareholder who later fails this fitness standard must immediately lose voting rights and reduce their holding to below the 5% threshold stipulated for individuals within the prescribed period.

As at December 2024, the NSE’s share register shows a market dominated by institutional investors, with relatively limited retail participation.

NSE Ownership Structure as at December 2024:

Several of the largest positions are held through nominee custodial accounts such as Standard Chartered Nominees and Stanbic Nominees.

Because nominee accounts are legal holding structures rather than owners, the shareholding limits apply to the underlying beneficial investor.