On 4th May 2022, the Capital Markets Authority (“CMA”) published the Draft Capital Markets (Public Offers & Listing of Securities) Regulations, 2022 (“draft Regulations”) inviting the general public and stakeholders for comments pursuant to section 12A (3) of the Capital Markets Act. The draft Regulations seek to repeal the existing Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations 2002 (“existing Regulations”) which are deemed as being overly prescriptive, outdated and onerous thus hindering the growth of the capital markets in Kenya. The draft Regulations seek to address the pertinent shortcomings in the existing Regulations in a bid to encourage more listing of securities while also ensuring the protection of investors.
Some of the changes proposed by the draft Regulations include:
- Allowing SMEs to raise capital on the GEMS market (now referred to as SME Market Segment) at the time of listing – the existing Regulations only allow SMEs to list by introduction;
- Introduction of the SME Fixed Income Securities Market Segment – This will allow smaller companies (SMEs) to issue bonds (upto an aggregate amount of Kshs. 250 Million) to the market creating another avenue for SMEs to raise capital;
- Merging the Main Investment Market Segment and the Alternative Investment Market Segment – Transitional provisions have been provided;
- New provisions on shelf prospectus/shelf registration and green shoe options;
- Broadening the scope of transaction advisers and removing the requirement of having a nominated advisor for issuers of securities on the GEMS (now SME Market Segment);
- Reviewing the provisions on private offers to address current shortcomings;
- Introduction of Special Purpose Acquisition Companies (SPAC).
The draft Regulations are available for download on the CMA website. The public has until 3rd June, 2022 to give comments of the draft Regulations.