CMA to review Collective Investment Schemes Regulations in response to market dynamics

The Capital Markets Authority (CMA), with the support of FSD Africa, has hired a consultant to review the Capital Markets (Collective Investment Schemes - CIS) Regulations, 2001 to make them responsive to market dynamics.

CMA Chief Executive Wyckliffe Shamiah (pictured) said the review is designed to address stakeholders’ concerns with the current framework. It will facilitate the development of a robust asset management sector. "Putting in place a robust legal framework will spur interest and participation by investors in Collective Investment Schemes," said Shamiah.

The plan projected assets under CISs to increase from Sh40 billion in January 2014 to Sh132 billion in 2020 and to Sh220 billion in 2023.

As of 30 June 2020, they were at Sh88.1 billion.

The growth projections have been slowed down largely by the effects of Coronavirus pandemic that affected most sectors of the economy.

The review of the Regulations follows the issuance of the new Guidance to Fund Managers of CISs on Valuation, Performance Measurement and Reporting Guidance by CMA in September 2020.

The Guidance, which takes effect on 1 January 2021, is expected to entrench international best practice in the capital markets by standardising investment performance measurement and presentation by collective investment schemes.

Under the Guidance, fund managers will be required to establish comprehensive, documented investment policies and procedures to govern the valuation of assets held by a CIS. The policies will identify the methodologies that will be used for valuing each type of asset and will clearly indicate how performance will be calculated, measured and presented.

Fund managers will also be required to have policies and procedures in place to detect, prevent and correct pricing errors that result in material harm to CIS investors. As well as provide performance measurement reports to the Authority and all existing and prospective investors, within 21 days after the end of each quarter.

The Guidance is aligned to the Principles for the Valuation of Collective Investment Schemes by the International Organization for Securities Commissions (IOSCO) and are aligned to the Global Investment Performance Standards (GIPS).