Capital Markets Authority (CMA) of Kenya

About Capital Markets Authority (CMA) of Kenya

The Capital Markets Authority (CMA) of Kenya was established in 1989 through the Capital Markets Act, Cap 485A. As the regulatory body for Kenya’s capital markets, the CMA is responsible for licensing, supervising, and monitoring the activities of market intermediaries, including forex brokers operating in Kenya.

Regulatory Framework

The CMA’s regulatory framework for online forex trading was established in 2017, making Kenya one of the few African countries with a comprehensive regulatory structure for forex trading. The framework aims to protect Kenyan investors while ensuring the integrity and stability of the forex market.

Key aspects of the CMA’s regulatory framework include:

• Licensing Requirements: Brokers must meet strict financial, operational, and governance standards to obtain a license.
• Capital Requirements: Licensed brokers must maintain a minimum capital base of $50,000.
• Client Fund Protection: Brokers must keep client funds in segregated accounts separate from company operational accounts.
• Leverage Limits: Maximum leverage is capped at 1:400 to protect retail investors from excessive risk.
• Reporting Requirements: Licensed brokers must submit regular financial and operational reports to the CMA.

Investor Protection Measures

The CMA has implemented several measures to protect investors in the forex market:

1. Investor Compensation Fund: This fund provides compensation to investors in case a licensed broker becomes insolvent.
2. Dispute Resolution: The CMA offers a mechanism for resolving disputes between investors and licensed brokers.
3. Risk Disclosures: Brokers are required to provide clear risk warnings and disclosures to clients.
4. Educational Initiatives: The CMA conducts investor education programs to help Kenyans understand the risks and opportunities in forex trading.

CMA-Regulated Forex Brokers

Several forex brokers have obtained CMA licenses, including:

• FxPesa (EGM Securities): The first broker to receive a CMA license in 2018.
• Scope Markets: Licensed by the CMA to offer online forex and CFD trading.
• SCFM Limited (Standard Capital): Received its CMA license in 2019.

Benefits of Trading with CMA-Regulated Brokers

Trading with a CMA-regulated forex broker offers several advantages for Kenyan traders:

• Local Regulation: Disputes can be resolved within Kenya’s legal framework.
• Enhanced Security: Strict regulatory oversight reduces the risk of fraud.
• Local Payment Methods: Regulated brokers typically accept local payment methods like M-Pesa.
• Local Support: Many regulated brokers maintain physical offices in Kenya, offering local customer support.

Limitations of CMA Regulation

While CMA regulation provides significant protection, it’s important to note some limitations:

• Limited Coverage: The CMA only regulates brokers specifically licensed in Kenya, not international brokers serving Kenyan clients.
• Developing Framework: As a relatively new regulatory framework, it continues to evolve and may not be as comprehensive as more established regulatory regimes.

Conclusion

The Capital Markets Authority of Kenya has made significant strides in regulating the forex trading industry, providing Kenyan traders with greater protection and confidence. When choosing a forex broker in Kenya, checking for CMA regulation should be a priority for traders seeking security and reliability.