Business Type: Stockbrokers buy and sell securities on behalf of clients at securities exchanges in return for brokerage commissions. Stock dealers carry on the business of buying, selling, dealing, trading, underwriting, or retailing securities as principals (on their own behalf).
Licensing Requirements – Stockbrokers: Must be incorporated as a company, provide a detailed business plan, have paid-up share capital of at least KES 50 million, lodge a security of KES 1.5 million (or higher as determined by the Authority) with a securities exchange or central depository, maintain shareholders’ funds not below KES 50 million at any time, ensure minimum paid-up share capital remains unimpaired and is not advanced to directors or associates, maintain working capital not below 20% of prescribed minimum shareholders’ funds, limit unsecured advances to directors/associates to not more than 10% of prescribed shareholders’ funds, and ensure the ratio of bank overdraft to paid capital does not exceed 20%.
Licensing Requirements – Stock Dealers: Must be incorporated, provide a detailed business plan and recent un-audited and audited accounts, lodge security of KES 1.5 million, have paid-up share capital of not less than KES 20 million, set aside investment capital of not less than KES 20 million in cash or listed securities portfolio (reduced to KES 5 million if promoted by a stockbroker through a subsidiary), maintain working capital not below 20% of prescribed minimum shareholders’ funds, limit borrowings (except bank overdrafts) to 40% of shareholders’ funds or market value of listed securities (whichever is higher), and ensure bank overdraft does not exceed 20% of paid-up capital.
Government Fees: Stockbroker application fees are approximately KES 100,000 with annual renewal of KES 50,000. Stock dealer application fees are approximately KES 80,000 with annual renewal of KES 40,000.
Timeline: Approval typically takes 60 days for stockbrokers and 60 to 75 days for dealers, subject to verification of capital adequacy and compliance with regulatory requirements.
Limitations: Both stockbrokers and dealers must maintain capital adequacy ratios, comply with trading rules, segregate client assets, implement internal controls and risk management systems, and report regularly to the CMA.
Penalties: Violations may result in fines, license suspension, claims from the Investor Compensation Fund for client losses, public censure, and criminal prosecution for fraud or misappropriation.
Enforcement: The CMA conducts regular inspections, reviews financial statements, monitors trading activities, and enforces mandatory reporting requirements.