CMA proposes new rules to protect investors, raise fees

By James Anyanzwa

The Capital Markets Authority (CMA) has recommended that investors be exempted from contributing towards the operations of the Investor Compensation Fund (ICF).

 At the same time the market regulator has proposed that market fees for the Central Depository and Settlement Corporation (CDSC) be increased owing to its national role and the increased risks from the ongoing dematerialization and consolidation initiatives.

 The latest are part of the authority’s recommendations for the new structure for various fees and commissions charged on the Nairobi Securities Exchange (NSE).

 Stockbrokers and investment bankers will be required to contribute towards the Investor compensation Fund at the rate of 0.15 per cent of the value of the transaction.

 According to the new proposals tabled yesterday for public scrutiny the transaction levy for CDSC has been increased to 0.08 per cent from 0.06 per cent while Transaction Levy (NSE and CMA) and Settlement Guarantee Fund has remained unchanged at 0.12 per cent and 0.02 per cent. Other charges in the equity Market such as market development Levy (0.01 per cent), CMA’s approval fee for listing by introduction (0.25 per cent), CMA’s approval fees for capitalization or rights issue (0.25 per cent), CMA’s approval fees for the issue of securities to the public (0.15 per cent) and CMA”s approval fees for commercial paper (0.10 per cent) remained unchanged.

 In the bond market the CMA also proposes that the net brokerage commission, NSE Levy and CDSC Levy remain unchanged at 0.024 per cent, 0.004 per cent and 0.002 percent respectively.

 The authority recommends an introduction of fees of 0.04 per cent to be paid by stockbrokers and investment bankers to the ICF.

Approval fee for government securities would remain the same at 0.075 per cent of the value of the issue while corporate bond approval fees to remain at 0.1 per cent.

Review of fees

CMA Acting Chief Executive, Mr Paul Muthaura, said the review of the fees, levies, and commissions are part of the reform agenda designed to enhance investor participation and market development.

He said the process was informed by extensive consultations with capital market stakeholders undertaken by an independent consultant who reviewed the various fees, levies, and commissions charged in the market with the aim of informing the policy framework to determine an appropriate fee structure that is consistent with the overall objective of deepening and broadening Kenya’s capital markets.

He said the stakeholders are expected to assess the proposed market fee structure and give comments by October 30, 2013.

 The current level of transaction fees on the NSE has been blamed for the dwindling revenue reserves of several market intermediaries.

The CMA, however, notes that under the proposed arrangement investors would be cushioned with additional costs being shared amongst the market players.

“Ultimately the fees have not gone up for investors but they have been redistributed amongst the players,” said Muthaura.

Market intermediaries have frequently raised concerns over what they earn on equity and bond transactions noting that the local capital markets is unattractive due to the existing transaction costs.

But the market regulator argues that low transaction costs are key to the growth of capital markets in the country.

The move is part of CMA’s efforts to deepen the capital markets whose role in resource mobilization is critical in the achievement of the country’s long term development blue-print dubbed Vision 2030.