Capital Markets (Public Offers and Listing of Securities) Regulations,2022

The CMA commenced a 30-day public exposure of the Draft Capital Markets (Public Offers and Listing of Securities) Regulations 2022 running from May 2^nd to 3^rd June 2022. If approved and passed, the Draft Regulations shall apply to the offer or sale to the public of securities in Kenya, in any form, with or without listing regardless of whether it is a private or public company.  It is important to note that the draft regulations shall also apply to the issue of fixed income securities of state corporations.

Key Highlights of the Draft Regulations are: 

The Draft Regulations are an important first step to align the regulatory framework to market realities including the advancement of technology which has transformed the way markets operate including the capital raising business models. The draft Regulations have also introduced two new market segments: SME Fixed Income Securities Market Segment (SME FISMS) and Small and Medium Enterprises Market Segment (SMEMS).

Moreover, with the main aim of increasing listings at the Nairobi Securities Exchange and enhance investor protection, the draft regulations provide stringent conditions to what will be considered a private offer to which the Regulations shall not apply. An offer shall not be considered a public offer if it is made to persons in Kenya under the following conditions:

1. The securities are offered to not more than 100 persons who are specifically identified and such offer shall not remain open for a continuous period of more than 12 months
2. The securities are offered to the members of a club or association (whether or not incorporated) having a common interest with each other provided the legal structure is not created to defeat the mandate of the Authority to oversee public offers
3. The securities are of a private company and are offered by that company to members or the employees of a company or a restricted circle of persons who have sufficient knowledge to understand the risks involved and the number does not exceed 100 persons.
4. No issuer offering securities shall issue any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public, or capable of informing the public, at large about such an offer.

Implications: If the Draft Regulations are passed and the BRT BOC Line 2 which is structured to be a private limited liability company does not meet the conditions listed above, the company will not be able to float its shares to the various Stakeholders through a private placement program as previously proposed.