Regulations and Market Practice (Kenya) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Central Bank of Kenya

Kenya's central bank, established under Article 231 of the Constitution and the Central Bank of Kenya Act (Cap 491), responsible for monetary policy, bank licensing and supervision, and payment system oversight.

Capital Markets Authority

Statutory regulator established under the Capital Markets Act (Cap 485A) that licenses market intermediaries, approves securities offerings and prospectuses, and supervises exchanges and central depositories in Kenya.

Financial Reporting Centre

Kenya's financial intelligence unit under POCAMLA 2009; it receives suspicious transaction reports and other disclosures from reporting institutions and disseminates intelligence to law enforcement agencies.

Bank minimum core capital

A bank must meet a minimum core capital requirement set by CBK prudential guidelines, currently KES 1 billion rising to KES 5 billion, with a higher threshold for mortgage finance companies.

Fit-and-proper test

A regulatory assessment of honesty, competence, financial soundness and absence of disqualifying convictions applied to directors, senior officers and significant shareholders of licensed financial institutions.

Prospectus approval

A public offer of securities in Kenya requires CMA approval of a prospectus meeting disclosure and eligibility requirements under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations.

Central Depository and Settlement Corporation

The CDSC holds securities in electronic book-entry form, provides settlement services and supports delivery-versus-payment settlement for trades executed on the Nairobi Securities Exchange.

Capital adequacy ratios

CBK requires banks to maintain a minimum core capital adequacy ratio of 10.5% and a total capital adequacy ratio of 14.5%, plus a conservation buffer, measured against risk-weighted assets.

Statutory liquidity ratio

A minimum liquid assets requirement imposed by CBK on banks, currently 20% of deposit liabilities, designed to ensure short-term solvency and depositor protection.

Suspicious transaction report

A report filed by a reporting institution with the Financial Reporting Centre when it suspects that funds are proceeds of crime or linked to terrorist financing, filed promptly without tipping off the customer.

POCAMLA

The Proceeds of Crime and Anti-Money Laundering Act 2009, Kenya's principal AML statute, imposing customer due diligence, record-keeping and reporting obligations on financial and designated non-financial institutions.

Client asset segregation

A conduct rule requiring intermediaries to hold client money and securities in designated trust or client accounts separate from the firm's own assets, with regular reconciliation and record-keeping.

Consumer protection guidelines

CBK and CMA rules requiring fair treatment, transparent charges, complaint handling and pre-contractual disclosure of terms to retail customers of financial institutions.

T+3 settlement

The standard settlement cycle on the Nairobi Securities Exchange under which trades are settled through the CDSC three business days after the trade date, using delivery-versus-payment.

National Payment System Act

The 2011 statute empowering CBK to license payment service providers, designate and oversee payment systems, and set rules for mobile money and electronic payments in Kenya.

Insider dealing

Dealing in securities while in possession of inside information, or communicating such information to others, prohibited under the Capital Markets Act and enforced by CMA.

Continuous disclosure

The obligation of listed issuers to disclose material price-sensitive information immediately to the exchange and CMA, and to publish periodic financial statements within prescribed timelines.

Data Protection Act 2019

Kenya's data protection statute establishing the Office of the Data Protection Commissioner and setting rules on lawful processing, data subject rights, breach notification and cross-border transfers.

Banking confidentiality

A duty under the Banking Act restricting disclosure of customer information by banks, subject to statutory exceptions such as AML reporting, court orders and regulatory requests.

Capital Markets Tribunal

A statutory tribunal that hears appeals against decisions of the Capital Markets Authority, with further appeal to the High Court on points of law.

Risk-based supervision

A supervisory model under which institutions are rated and supervised proportionately to their risk profile, focusing regulatory resources on the highest-risk activities and firms.

Change of control approval

Regulatory approval required before a person acquires a significant shareholding or control of a licensed bank, insurer or capital market intermediary; failure can void the transaction.

Collective investment scheme

A pooled investment vehicle regulated by CMA under the CIS Regulations, requiring an independent trustee, a licensed fund manager and disclosure of fees and valuation policies.

Single obligor limit

A prudential cap under the Banking Act restricting credit exposure to a single borrower or connected group to a percentage of the bank's core capital.

Enhanced due diligence

Additional customer due diligence applied to higher-risk relationships such as politically exposed persons and correspondent banking, including source-of-funds verification and senior management approval.

Tipping off

Disclosing to a customer or third party that a suspicious transaction report has been or will be filed, which is prohibited under POCAMLA and punishable as an offence.

Complaints handling

The obligation of financial institutions to log, investigate and resolve customer complaints within prescribed timelines, with escalation to CBK, CMA, IRA or the relevant ombudsman.

Delivery versus payment

A settlement mechanism in which the transfer of securities occurs simultaneously with the transfer of funds, reducing principal risk in trades settled through the CDSC.

Market manipulation

Conduct such as wash trades, spoofing, painting the tape or spreading false information that distorts the price or volume of securities, prohibited under the Capital Markets Act.

Data protection impact assessment

A documented assessment required before high-risk processing of personal data, evaluating necessity, proportionality and risks, and identifying mitigation measures under the Data Protection Act 2019.

Record retention period

The minimum period for keeping transaction and customer records; POCAMLA requires at least five years, while CBK and CMA prescribe longer periods for books and records.

Regulatory sandbox

A controlled testing environment, such as CBK's fintech sandbox, allowing innovative financial products to be piloted under supervisory oversight with tailored safeguards.