CS. Nicholas Letting’ Chairman Institute of Certified Public Secretaries Of Kenya (ICPSK)

1. CS. Nicholas Letting’ Chairman Institute of Certified Public Secretaries Of Kenya (ICPSK) December 17-19, 2015 The 43rd National Convention of Company Secretaries Institute of Company Secretaries of India New Delhi, India

2. Outline of Presentation • About ICPSK • Introduction • Nairobi Securities Exchange • Products and Services at NSE • Listing Incentives • Listing Requirements in Kenya • Eligibility Requirements for Public Offering of Shares and Listing • Continuing Obligations • Highlights on corporate governance regulations • Capital Markets Authority • Statutory Objectives of CMA • Regulatory Model • Investigative Powers of CMA • Enforcement Powers of CMA • Conclusion ICPSK

3. About ICPSK • The Certified Public Secretaries of Kenya Act 1988 (Cap 534) established the Institute of Certified Public Secretaries of Kenya (ICPSK) and the Registration of Certified Public Secretaries Board (RCPSB). • The membership of the Institute has continued to grow since the inception of the Institute and now stands at 3,000 members. • The mandate of the Institute is to promote good governance in both private and public Institution. Key among the recent achievements include development of: • Code of Governance for Private Organizations • Code of Governance for State Corporations • Governance Audit Framework ICPSK

4. Introduction • In Kenya, the Capital Markets are regulated by the Capital Markets Authority (CMA) which is established under Capital Markets Act (Chapter 485A, Laws of Kenya) (“the Act”). • The Nairobi Securities Exchange (NSE) is the only Securities Exchange in country. • All listed Companies on the NSE are required to engage services of a Company Secretary who must be a member of ICPSK. ICPSK

5. The NSE 5 Direct Financing Regulation Equity Investments ADVISORS: IB/Nominated Advisors/Brokers/Lawyers/ Accountants/ Financing through capital markets Savings through The Capital Markets Share Immobilization Share Immobilization

6. Products and Services at NSE • Shares • Bonds • NSE Real Estate Investment Trusts Market Segment; • NSE Derivatives Market; • Exchange Traded Funds. ICPSK

7. Listing Incentives

8. Listing Incentives contd.

9. Listing Requirements in Kenya • The NSE offers Company’s an option to either list on: • The Main Investment Market Segment (MIMS), • The Alternative Investment Market Segment (AIMS) or • The Growth Enterprise Market Segment (GEMS). • Each of the above category has its own listing requirements. ICPSK

10. Eligibility Requirements for Public Offering of Shares and Listing

11. Cont’ Eligibility Requirements

12. Cont’ Eligibility Requirements

13. Cont’ Eligibility Requirements

14. Cont’ Eligibility Requirements

15. Cont’ Eligibility Requirements

16. Continuing Obligations After they have been listed, Companies are required to: • the shareholders are aware of the major developments in the company • Help shareholders to make informed decisions regarding their investment in the company • comply with the continuous obligations • Immediately disclose any development that will lead to change in the financial position of the company or movement of its share prices

17. Continuing obligations • Issue cautionary statements where the happening of an event could lead to material movements in prices • Inform NSE and CMA on announcement of dividends within 24 hours following the board resolution • Pay Dividends declared within ninety days from date of books closure for interim dividends or ninety days after shareholder approval for final dividends

18. Continuing obligations • All interim and audited accounts to be prepared in accordance with IFRS • Interim reports to be prepared and published within two months while audited to be prepared and published within four months • Every issuer to notify the exchange and the CMA within 24 hours after the approval of the accounts by its board of directors • Every issuer to hold an AGM within six months after the end of the financial year

19. Continuing obligations • Make a public announcement where there are any changes relating to its capital structure • File with CMA the shareholding structure indicating the top shareholders of the companies and significant changes in shareholding in the company • Issue a 21 day notice for a shareholders meeting • Always comply with the corporate governance regulations

20. Highlights on corporate governance regulations • Every issuer must establish an audit committee of the board • Directors not to hold more than five directorship positions in listed companies at the same time • A chairman of a company not to hold more than two such positions in the listed companies at the same time • Company secretaries to be members of ICPSK • Chief Finance officers or heads of finance to be members if ICPAK • An auditor of a listed company should be a member of ICPAK

21. The CMA • CMA is Charged with the prime responsibility of developing and regulating a fair, orderly efficient and transparent Capital Markets • In that regard, it facilitates capital formation and therefore needs to balance between needs of business to raise capital and the needs of the investors to be protected when they provide capital ICPSK

22. Statutory Objectives of CMA • Development of all aspects of the capital markets. • Facilitate existence of a nationwide system of stock market and brokerage services to enable wider participation of the public. • Facilitate use of electronic commerce for capital markets • Creation, maintenance and regulation of an orderly, fair and efficient securities market • Operation of compensation fund to protect investors from financial loss due to failure of a licensee. • Protection of Investor Interests.

23. Regulatory Model • In its regulatory role, CMA uses a disclosure based approach where it sets down minimum disclosure obligations to ensure that the investor has adequate information to make an informed decision. • In this approach, CMA as a regulator does not take any responsibility for the investment decision. • To ensure that the disclosed information is reliable, liability is imposed for the disclosure of false or misleading information. ICPSK

24. CAPITAL MARKET PRODUCT STRUCTURE IN KENYA Equity markets (EMs) Debt market (DMs) Derivatives markets (DVs) • Already in the market • Not yet launched • In the pipeline

25. MARKET LICENSEES

26. STATE OF THE KENYAN CAPITAL MARKETS AS AT 2015 OCTOBER- PERFORMANCE • The NSE20 share index as at November 2015 stood at 4017 points down from 5,212 index point in January 2015. • Reflection of a number of macroeconomic factors. • Market capitalization stood at 1,930.81 bln in October 2015 while equity turnover as at October 2015 stood at Kshs. 181.12 billion. • The NSE index return as at the end of 2014 was 5113. NSE was best performing market in Africa and third best globally in 2013 with an index return of 44%. • As at October 2015 the bond turnover was at 263.71 billion. Annual bond turnover in 2014 was. 506.05 billion, as compared to Kshs 452.5 billion annual bond turnover figures in 2013.  • As at October 2015 equity turnover stood at Kshs. 181.12billion. Annual equity turnover in 2014 was 215.7  billion, as compared to Kshs 155.7 billion annual equity turnover figures in 2013.

27. Performance by market capitalization

28. NSE 20 trend

29. Equity Turnover as at November 2015

30. FUND RAISING CAPACITY OF THE MARKET • Kshs 3.4 trillion raised through Kenyan capital markets in the last 10 years: bonds and equities • Over Ksh 550 billion raised in the last 6 years notwithstanding the global financial crisis • Eurobond success demonstrates absorptive capacity outside Kenyan borders-highest subscription level in Africa’s history (500%)

31. ABSORPTION CAPACITY *As at October 2015 **Bonds figures are for total received

32. The Pillar behind the Capital Markets Strategic Direction in Kenya“The Capital Markets Master Plan”

33. Summing up the overarching aspiration

35. IMPLEMENTATION ROADMAP Approval by CMA Board and Exposure to the public Approval and Launch of the Master Plan Implementation of recommendations Monitor progress Update Master Plan Cabinet Secretary, National Treasury Report progress CMA CMA Relevant government agencies Implementation Committee and Industry Working Groups Relevant market institutions and participants

36. Implementation Structure & Management • CMMP National Steering Committee • CS, National Treasury – Chairman • CS, Ministry of Agriculture, Livestock and Fisheries; • CS, Mining; • CEO, Capital Markets Authority; • Governor, Central Bank of Kenya; • Attorney General; • CEO Communications Commission of Kenya; • Secretary, NESC

37. Implementation Structure & Management Cont.. • CMMP Implementation Committee • CEO, Capital Markets Authority - Chairman; • Rep. National Treasury; • Rep. Central Bank of Kenya; • Rep. Vision 2030; • Rep. Development Partners; • Rep. Academia; • Corporate Governance Practitioner • Rep. Industry

38. Implementation Structure & Management Cont.. • 4 CMMP Working Groups • Government Institutions: • NSE, CDSC, market practitioners • Academia • Industry associations (Fund Management, CIS, KASIB, Lease Finance and other markets participants) • The WGs are: • Supporting the domestic economy • Financial markets • Legal and Regulatory • Regional and International

39. Key Implementation Milestones • Launch of the plan – 21st Nov. 2014 • Appointment of the CMMP Implementation Committee (CMMPIC) – January 2015 • Constitution of the Working Groups – February 2015 • Launch of WG 2 – March 2015 • Gazettement of the National CMMP Steering Committee – March 2015 • Meetings of CMMPIC – from April 2015 • Various stakeholder engagements • Inaugural National Steering Implementation Committee meeting held in October 2015.

40. KEY MARKET DEVELOPMENTS • Upscaling the scope of Risk Based Supervision; • Demutualization and Self Listing of the NSE; • Approval of NSE as a Derivatives Exchange; • Review of the Legal Framework in line with IOSCO principles; • Development of a harmonized legal and regulatory framework for the EAC capital markets; • Introduction of international certification standards in Kenya’s capital markets industry; • Module One of Certification completed in collaboration with CISI. CMA pilot staff and trainers completed exam. Full implementation to begin in January 2016 • Overhaul of the Corporate Governance Framework and Development of a Stewardship code.

41. KEY MARKET DEVELOPMENTS Cont.. • Securities settlement through Central Bank of Kenya; • First REIT approved in October 2015; • Final policy guidance note on Exchange Traded Funds Issued; • Joint Financial Sector Regulators Project Management Office (PMO) for the development of Islamic Finance Markets in Kenya.

42. KEY MARKET DEVELOPMENTS • The introduction of fiscal incentives to support the roll out of REITS and ABS; • Reduction of the NSE trading participant admission fees from Ksh250 million to Ksh25 million to lower barriers to market access; • Initiatives to enhance market liquidity through Securities Lending and Borrowing, Margin Trading, and Short-Selling; All introduced in the Finance Act (No. 14 of 2015), 

43. KEY MARKET DEVELOPMENTS • Authority continues to implement a multi-tier Investor Education and Public Awareness Strategy that includes among others, several County engagements: • 17 Counties have already been covered with various target groups such as gender, youth, issuers, intermediaries learning institutions • Finalized a policy paper on County securitization; • CMA institutional capacity development ongoing.

44. Investigative Powers of CMA Investigative powers includes: • To investigate upon request or in its own motion • To request and direct submission of information • To summon witness and suspects • To take statements under oath or affirmation • To enter, search and seizure • To Trace assets of persons found to have engaged in fraudulent dealings in securities • To order caveats pending investigation • To appoint an auditor to undertake a specific audit

45. Enforcement Powers of CMA Enforcement powers includes: • Levy financial penalties • Order a person to remedy or mitigate the effect of the breach, make restitution or compensation • Publish findings of malfeasance by any person • Issue a public reprimand • Suspend trading of the shares of the listed company for a specified period

46. Enforcement Powers of CMA • Issue restrictions on the use of a license • Recover an amount equivalent to twice the amount of the benefit accruing to the person in respect of the breach • Revocation of the license • Issue Directives like cease and desist • Disqualification of a person from appointment as Director of a licensee, listed company or securities exchange • To intervene in the management of a licensee through appointment of statutory managers • Remove any officer/employee of the Licensee • Power to prosecute upon request to the DPP

47. Enforcement Powers of CMA • Issue restrictions on the use of a license • Recover an amount equivalent to twice the amount of the benefit accruing to the person in respect of the breach • Revocation of the license • Issue Directives like cease and desist • Disqualification of a person from appointment as Director of a licensee, listed company or securities exchange • To intervene in the management of a licensee through appointment of statutory managers • Remove any officer/employee of the Licensee • Power to prosecute upon request to the DPP

48. Conclusion ICPSK

49. Institute of Certified Public Secretaries of Kenya (ICPSK) CPS Governance Centre, Kilimanjaro Road, Off Mara Road, Upper Hill P.O. Box 46935 00100,Nairobi. Tel.: +254 20 3597840/2 / +254 734603173, +254 770159631 E-mail: info@icpsk.com Website: www.icpsk.com ICPSK