Kenya: Capital markets licensing regime overhauled – What market participants need to know?

The Cabinet Secretary for the National Treasury and Economic Planning has published the Capital Markets (Licensing Requirements) (General) Regulations, 2025 (2025 Regulations), overhauling Kenya’s capital markets licensing framework. The new 2025 Regulations repeal the previous regime enacted in 2002 in its entirety and introduce modernised requirements for all capital markets intermediaries.

Existing licensees have been given a grace period until 11 December 2026 to comply with any updated requirements.

Some of the key changes introduced by the 2025 Regulations are summarised below.

New licence categories
In recognition of the technological shifts in the industry, the Capital Markets Authority (CMA) has introduced a new licence category for intermediary service platform providers, who are operators of ‘a digital application or otherwise which facilitates aggregation, marketing and distribution of capital markets products and services’. This provides a new licence category for web and mobile-based service providers, who previously had to enter into partnerships with existing licensees to provide their services. Entities that already hold a licence from the CMA are excluded from having to obtain an intermediary service platform provider’s licence.

In the same vein, the CMA will now be able to licence robo-advisory firms, following the expansion of the definition of investment advisors to include digital platforms that provide automated, algorithm‑driven investment advice.

The 2025 Regulations have also introduced a new broker-dealer licence. Broker-dealers will be hybrid licensees, empowered to engage in both stockbrokerage as well as dealer business, and the arranging of underwriting services in issuances of securities. Broker-dealers will be permitted to deal on their own account, which stockbrokers are explicitly prohibited from.

Over-the-counter platforms will also now be required to obtain CMA licensing going forward.

The 2025 Regulations have also provided licensing requirements for trustees and custodians. However, there are discrepancies with respect to the licensing provisions for these two licences – between the 2025 Regulations and the Capital Markets (Collective Investment Schemes) Regulations 2023 (CIS Regulations), which remain in force. Clarity will be required from the CMA regarding these issues, particularly in respect of capital requirements, delegation of roles among others.

Revised capital requirements and reporting
The 2025 Regulations have also introduced revised capital requirements for most licence categories. These have largely been increased to enhance financial stability, with licensees now being required to make monthly risk-based capital adequacy reports to the CMA.

We compare below the core capital requirements across the licence categories:

*These are capital requirements under the CIS Regulations, which remain in force. Clarity will be required from CMA regarding which thresholds will apply going forward vis-à-vis the 2025 Regulations.

Introduction of market-makers
The 2025 Regulations expressly expand the scope of authorised activities for investment banks. In addition to their traditional corporate finance, advisory, broking and dealing functions, investment banks are now permitted to engage in market‑making activities. This inclusion formalises a role that was not expressly provided for under the 2002 framework and signals the CMA’s intention to deepen liquidity and enhance price discovery in Kenya’s capital markets.

Introduction of in-principle approvals
From a procedural standpoint, the 2025 Regulations have introduced an approval‑in‑principle stage in the CMA licensing process providing greater clarity and predictability for new entrants. Applicants who satisfy the majority of requirements may receive an in‑principle approval valid for six months, during which they may establish systems and recruit staff but may not commence operations until full licensing is granted.

This replaces the ‘all-or-nothing’ licensing process that previously applied and required significant upfront costs and commitments.

Increased licensing fees
The 2025 Regulations have significantly increased the annual licensing fees payable by certain licensees. In particular, fund managers face the steepest increase, with a new annual fee payable equivalent to:

• 0.05% of assets under management (AuM) for collective investment schemes subject to a minimum of KES 100 000 and a maximum of KES 15 million; or
• 0.01% of AuM for non-collective investment schemes (presumably special funds and alternative investment funds) but excluding pension funds, subject to a maximum of KES 15 million.

This is a shift from the previously applicable fee of KES 100 000 (or KES 50 000 for fund managers licensed under the Retirement Benefits Act) that was payable annually.

Investment advisors will also now be required to pay an annual renewal fee of KES 100 000, doubled from the previous KES 50 000.

Conclusion
Overall, the 2025 Regulations represent a decisive modernisation of Kenya’s capital markets licensing architecture. Coupled with the recent removal of single-investor shareholding limits in capital markets licensees, the 2025 Regulations offer an opportunity for existing and prospective intermediaries to operate in a more predictable framework, fit for the modern realities of Kenya’s capital markets.

By Wathingira M. Gituro, Partner, Mutugi Mutegi, Senior Associate, and Cindy Rennys Miyoma and Nduta Muhindi, Associates, Bowmans Kenya