Description
UNIT DESCRIPTION
This paper is intended to equip the candidate with knowledge, skills, understanding and
attitudes that will enable him/her to comply with and implement the regulatory framework
governing financial markets in practice.
LEARNING OUTCOMES
A candidate who passes this paper should be able to:
• Identify the key elements of the legal and regulatory framework relating to financial
markets
• Demonstrate understanding of the licensing requirements of intermediaries in the
financial market
• Relate with and enforce requirements of market regulators, the securities exchange and
other financial market players
• Demonstrate an understanding of the processes and law on anti-money laundering and
financing of Terrorism;
• Apply corporate governance principles in the management of market intermediaries
CONTENT
1. Introduction to Law
1.1 Nature, purpose, and classification of law
1.2 Sources of law
1.3 The court system; establishment, composition, and jurisdiction;
1.4 Fundamentals of the law of contract: definition; classification; formation; terms of
a contract; vitiating factors; illegal contracts; discharge of contracts; remedies for
breach of contracts; limitations of actions
1.5 Fundamentals of the law of agency: nature of agency; formation of agency;
authority of agents; duties and rights of principals and agents; personal liability of
agents; termination of agents
2. Financial markets regulatory institutions
2.1 Historical development of the law and regulations governing financial markets
2.2 Objectives of regulation; need for regulation of financial markets
2.3 Regulatory strategies in financial services
2.4 Financial market regulators (as applicable in Kenya or other jurisdictions where
relevant): central banks; capital market authorities; deposit insurance
corporations and deposit insurance funds; insurance regulatory authorities ;
retirement benefit authorities; sacco societies regulatory authorities; unclaimed
financial assets authorities; competition authorities or equivalent bodies
2.5 Professional bodies in financial services- Institute of Certified Investment and
Financial Analysts (ICIFA)
2.6 Regulations in the international financial markets
3. Regulations of Capital Markets
3.1 The Capital Markets Authority (CMA) – Powers, functions, and roles
3.2 Investor Compensation Fund (ICF)
3.3 The Capital Markets Tribunal: Powers, functions, and roles
3.4 The Capital Markets Fraud Investigations Unit
3.5 The International Organisation of Securities Commissions principles relating to
the regulator
4. Financial market intermediaries
4.1 Requirements for licensing of market intermediaries
4.2 Market intermediaries:
4.2.1 Investment Banks, Stock Brokers, and Dealers
4.2.2 Fund Managers and Investment Advisers
4.2.3 Credit Rating Agencies
4.2.4 Collective Investments Schemes (Unit Trusts and Mutual Funds)
4.2.4 Custodians/ Authorized Depositories
4.3.5 Online Foreign Exchange Brokers and Money Managers
4.3.6 REIT Managers and REIT Trustees
4.3.7 Foreign Exchange Bureaus
4.3.8 Private Equity and venture capital Firms
4.3.9 Savings and Credit Cooperative Societies
4.3 Obligations of licensed intermediaries: conduct obligations; client accounts; record
keeping and reporting obligations
4.4 Roles of an authorized depository and when the appointment of a custodian is required
5. Central Securities Depository
5.1 The Central Depository Settlement Corporation
5.2 Establishment of the Central Depository
5.3 Role and duties of a Central Depository
5.4 Central Depository agents
5.5 Rules relating to Appointment of Central Depository Agents
5.6 Rules of a Central Depository
5.7 Structure of Central Depository Accounts; settlement of trades
5.8 Insurance of a Central Depository
5.9 The Business Conduct Committee of the Central Depository Corporation
5.10 Establishment and Management of the Central Depository Guarantee Fund
6. Securities Exchanges and Clearing Agencies
6.1 Establishment of Securities Exchanges
6.2 Role of the Securities Exchange
6.3 Membership of the Securities Exchange
6.4 The Board and committees of the Securities Exchange
6.5 Securities Exchange listing rules; listing process; role of advisers; eligibility and
disclosure requirement; continuing obligations
6.6 Takeover and Merger Regulations
6.7 Foreign Investor Regulations
6.8 Derivatives Exchange Regulations: Requirements for Derivative Exchanges
6.9 Raising capital in the securities market: Initial Public offering, introductions, offers
for sale of issued securities, Additional new listing of securities
6.10 Market Segments and Eligibility requirements: Main Investment Market Segment
(MIMS), Alternative Investment Market Segment (AIMS), Fixed Income Securities
Market Segment (FISMS) and Growth Enterprises Market Segment (GEMS)
6.11 Appointment and Responsibilities of nominated advisors, sponsoring
stockbrokers and lead transaction advisor
6.12 Procedure for admission to listing of REITS securities
6.13 Suspension and delisting of securities listing and post-listing requirements
6.14 Demutualization and Self–Listing of the Exchange
6.15 Cross-border listing
6.16 Over-the-counter (OTC) markets and other multilateral trading facilities (MTF)
6.17 Clearing Agencies
6.18 The International Organisation of Securities Commissions (IOSCO) principles for
self-regulation and enforcement of securities regulation
7. Investment Funds
7.1 Collective Investment Schemes (CISs): types of CIS; requirements for
authorisation of a fund and the restrictions on advertising content; purpose and
main contents of the information memorandum; role of the main participants in a
collective investment scheme; rules surrounding the valuation and pricing of a
fund and investor dealing
7.2 Exchange-Traded Funds (ETFs): characteristics of exchange-traded funds;
Listing ETFs; Trading and Settlement
7.3 Real Estate Investment Trusts (REITs): Types of REITs; characteristics of
REITS; Regulatory Requirement of REITS; Role of the REIT Manager; Role of
the Trustee
7.4 Venture Capital Companies: characteristics of Venture Capital Companies;
Eligibility Requirements for a Registered Venture Capital Company
7.5 Employee Share Ownership Plans (ESOPs): Creation of an ESOP; Scheme
Requirements
7.6 Special Interest Schemes: characteristics; requirements for special interest
schemes
8. Corporate Governance and Conduct of Business of Market Intermediaries
8.1 The concept of corporate governance
8.2 Objective of the corporate governance Regulations
8.3 Role of the Board, its committees, and the Board Charter
8.4 Responsibilities of shareholders
8.5 Employees and prescribed Code of Conduct
8.6 Management of a market intermediary
8.7 Internal controls and risk management
8.8 Capital Markets Authority Audit
8.9 Conduct of business of market intermediaries
8.9.1 Principles when conducting business with the public
8.9.2 Know your client procedures
8.9.3 Client rights, contract notes, confidentiality, funds, and complaints
handling procedures
8.9.4 Purpose of the fair and clear communications rule
8.9.5 Rules surrounding cold calling
8.9.6 Rules surrounding the disclosure of charges
8.9.7 Required content of a client agreement
7.9.10 The concept of fiduciary duty
7.9.11 Rules around client confidentiality and access to client information
7.9.12 Conflict of Interest
7.9.13 Suitability of advice; investment advice process
7.9.14 Client Money: segregation of client money bank accounts; Operating
Client Money Accounts; Reconciliation and Accounting Record;
Registration of Asset
7.9.15 Unacceptable trading practices: front running; churning; insider dealing;
market abuse; penalties for unacceptable trading practices
9. Anti-Money Laundering and Combating the Financing of Terrorism
9.1 Money laundering, the process, and related offences; suspicious transactions
reporting
9.2 Financial Reporting Centre-objectives, functions, and powers
9.3 The Anti-Money Laundering Advisory Board; Anti-Money Laundering obligations
of a Reporting Institution
9.4 Money laundering checks: best execution rule; timely execution rule; timely and
fair execution rule; contract notes rule; off-market transactions
9.5 Assets Recovery Agency (ARA)- functions, powers, and funds
9.6 Criminal Assets Recovery Fund – functions, powers, and funds
9.7 Role of the Financial Action Task Force
9.8 Role of Egmont Group of Financial Intelligence Units
9.9 Role of Eastern and Southern Africa Anti Money Laundering Group (ESAAMLG)
9.10 Role of United Nations Office on Drugs and Crimes (UNODC)
9.11 Customer Due Diligence requirements for natural persons, legal persons,
partnerships and trusts
9.12 Counter Financing of Terrorism: Inter-Ministerial Committee – Functions and
powers of the Committee; mechanism for coordinating counter-terrorism
measures
9.13 Enhanced due diligence measures
9.14 Establishment of ultimate beneficiaries
9.15 Politically exposed persons
9.16 Correspondent relationships
9.17 Wire transfers
9.18 Legitimacy of source of funds
