Fund Description

A fund manager is a financial  professional who is appointed by a fund or  trustee to manage one or more schemes offered by the fund house. Fund Managers  implement well thought out investment strategies in order to achieve their investment objective. Given that thousands of investors entrust this individual with their money, the role of a fund manager gains much importance.

Legal framework in Kenya- applicable law

  1. Capital Markets Act
  2. The Investments and Financial Analysis Act no.13 of 2015
  3. Part IV of the Capital Markets (Licensing Requirements) (General) Regulations, 2002
  4. The Capital Markets (Corporate Governance)(Market Intermediaries) Regulations, 2011

             A person or a firm intending to carry on the business of a Fund Manager must hold a valid license issued by the CMA.

                                                                                                      Procedure
  1. To obtain a fund manager license, the applicant has to contact the Capital Markets Authority offices.
  2. The applicant has to make sure he or she has all the required documents that are required for this process to be successful and they can be found under the “Required Documents” section of this page or in the Fund Managers Checklist.
  3. Payment of appropriate fees should be made and that can be found under the “Fees” section of this page or in the Capital Markets Authority’s CMA Service Delivery Charter.
  4. On completion of this process, Capital Markets Authority will notify the applicant on any outstanding issues 14 working days after lodging an application and if there are no issues, the Authority will issue to the applicant a license within 25 working days.
                                                                                               Required Documents
  • Application form
  • Memorandum and articles of association
  • Certificate of incorporation
  • Business plan complying with the requirements of regulation 29(1)(d) (Investment adviser and fund manager) of the Capital Markets Authority (Licensing Requirements) (General) Regulations.
  • A statement of the un-audited accounts for the period of accounting year ending not earlier than six months prior to the date of application and audited annual accounts for the preceding two years (in the case of application of licence), management accounts upto the 30th November and audited annual accounts for the preceding year (in the case of renewal of licence)
  • A declaration by the directors as to whether after due enquiry by them in relation to the interval between the date to which the last accounts have been made and a date not earlier than fourteen days before the date of the application
    • the business of the company has, in their opinion, been satisfactorily maintained
    • there have, in their opinion, arisen any circumstances adversely affecting the companys trading or value of its assets
    • there are any contingent liabilities by reason of any guarantees given by the company or any of its subsidiaries
    • there are, since the last annual accounts, any changes in published reserves or any unusual factors affecting the profit of the company or any of its subsidiaries.
  • A copy of the bank guarantee to be lodged with the securities exchange or the central depository (where applicable).
  • A declaration by persons authorized as prescribed to accompany the application form

Compliance Requirements of a Fund Manager

   

  1. Every fund manager that manages discretionary funds has to appoint a custodian for the assets of the fund.
  2. A fund manager must publish their financial statements in at least two daily newspapers that have national circulation
  3. They must display audited balance sheet, profit and loss statement, auditor’s report and a list of its directors
  4. Fund managers must also have professional indemnity insurance with the amount of cover based on funds under management.
  5. The financial requirements include shareholder’s funds of Kshs 10 million and the higher of Kshs 5 million or 8% of liabilities in liquid capital.
  6. To act in the interests of the fund and its investors and avoid conflicts of interest.
  7. To appoint an independent auditor who holds a valid practising certificate issued by the Institute of Certified Public Accountants of Kenya (ICPAK).

                                                   

 

Licensed Fund Managers in Kenya

Requirements of obtaining a Fund Manager License (CMA CHECKLIST) in Kenya.

  1. Application form- duly filled and executed in duplicate (Form 1)
  2. Certified copy of the Certificate of Incorporation
  3. Certified Copy of the Memorandum and Articles of Association (with objects that authorize the company to carry out the business for which the license is sought)
  4. Accounts
  5. 6 months unaudited accounts plus 2 years where relevant
  6. Paid up share capital (x ≥ Kshs 2,500,000)
  7. Evidence of minimum paid up share capital
  8. Shareholders’ funds (x ≥ Kshs 2,500,000)
  9. Liquid capital (x ≥ The higher of Kes. 1,000,000 or 8% of total liabilities)
  10. Business Plan 
  • Board of Directors which should comprise of a minimum of 3 directors a third of whom must be natural persons, at least one third should be independent and non-executive directors, not more than one third of the directors who are close relations of any director. A director should not hold more than 2 directorships in market intermediaries unless they are subsidiaries or holding companies. The Chairman of the Board must be a non-executive Director
  • Company Secretary (provide the name of an individual and ICPSK Number)
  • Shareholding Structure: number of shares, the percentage holding and beneficial shareholding of all corporate shareholders and any existing Trusts if applicable.
  • Name and competencies of Chief Executive
  • Financial projections for 3 years
  • Operating and IT system (describe the system in place or the system to be put in place once licensed)
  • External Auditor
  • Place of business/ premises
  • Details of staff (please note the requirement for risk management, compliance officer and internal audit functions as per the Corporate Governance Regulations)
  • Directors’ declaration as required under paragraph 1(e) of the Application form
  1. A Board Charter that-      
  2. confirms the board responsibility for adoption of strategic plans, monitoring, operational performance, the determination of policies and processes that ensure the intermediary’s risk management and internal controls.
  3. reserves specific powers to itself and delegates other matters to the management of a market intermediary
  4. provides a code of conduct that addresses conflict of interest relating to directors and management which shall be regularly reviewed and updated as necessary;
  5. identifies the key risk areas that require regular monitoring.
  • Clear separation of roles and responsibilities of the chairman and chief executive.
  • A policy for appointment of employees
  • A Risk Management framework
  • Two (2) letters of business reference
  • One (1) letter of bank reference
  • Comprehensive Curriculum Vitae for directors and key personnel- the chief executive officer, chief financial officer, chief compliance officer, secretary to the Board, chief internal auditor or any manager
  • Duly filled and executed Fit & Proper Form for directors and key personnel
  • Valid certified copies of the Police Clearance Certificate for directors and key personnel
  • Application Fee of Kshs. 2,500