How to become a Fund Manager in Kenya

A Fund Manager in Kenya is a market professional who promulgates analysis and research on capital markets securities and advising investors on such securities at a commission. They also manage portfolios of securities on behalf of clients pursuant to a contract. A fund manager is a key participant in the management of a collective investment scheme or registered venture capital company. They also act as an investment adviser who manages a portfolio of securities in excess of an amount prescribed by the CMA (10 million).

A fund manager is a one of the main participants in a unit trust among the Trustee and Custodian.

To become a fund manager in Kenya, one is required to apply for a licence to act as such from the Capital Markets Authority. One of the powers of the CMA is to grant valid licences for market participants such as a stockbroker, derivatives broker, dealer or investment adviser, authorised securities dealer, fund manager, investment bank, authorised depository (also known as custodians) or real estate investment trust (REIT) manager or trustee.

PRINCIPAL DUTIES OF A FUND MANAGER

1. Formulation of a prudent investment policy and investment of the fund’s assets
2. Valuation of the fund and the setting the dealing prices in accordance with the information memorandum
3. Publication of dealing prices daily. Where the fund does not deal on a daily basis, prices should be published at least monthly and at least three days before the dealing day
4. Dealing with investors when they wish to invest in the fund or redeem their existing holdings and issuing confirmation of the details of the transactions. The fund manager should pay any monies received to the trustees within 30 days of receipt
5. Issuing certificates of entitlement to holders every 30 days that are prima facie evidence of the title of the holder to the units or shares
6. Preparing and issuing dividend distributions and financial statements to investors.
7. Undertake regular valuations of the investment fund and to calculate and publish the prices at which investors can buy or sell units in a unit trust.

COMPLIANCE REQUIREMENTS OF BEING 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).

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 licence issued by the CMA.

The Requirements of obtaining a Fund Manager Licence (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
    1. 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
    1. Company Secretary (provide the name of an individual and ICPSK Number)
    1. Shareholding Structure: number of shares, the percentage holding and beneficial shareholding of all corporate shareholders and any existing Trusts if applicable.
    1. Name and competencies of Chief Executive
    1. Financial projections for 3 years
    1. Operating and IT system (describe the system in place or the system to be put in place once licensed)
    1. External Auditor
    1. Place of business/ premises
    1. Details of staff (please note the requirement for risk management, compliance officer and internal audit functions as per the Corporate Governance Regulations)
    1. Directors’ declaration as required under paragraph 1(e) of the Application form

• A Board Charter that-      
• 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.
• reserves specific powers to itself and delegates other matters to the management of a market intermediary
• provides a code of conduct that addresses conflict of interest relating to directors and management which shall be regularly reviewed and updated as necessary;
• 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

EXAMPLES OF FUND MANAGERS IN KENYA

1. Alpha Africa Asset Managers
2. Amana Capital Limited
3. Apollo Asset Management
4. Britam Asset Managers (Kenya) Limited
5. Metropolitan Cannon Asset Managers Limited
6. Nabo Capital Limited
7. CIC Asset Management Limited
8. Co-op Trust Investment Services Limited
9. FCB Capital Limited
10. Fusion Investment Management Limited
11. GenAfrica Asset Managers Limited
12. ICEA Lion Asset Management Limited
13. Madison Investment Managers Limited
14. Old Mutual Investment Group Limited
15. Sanlam Investments East Africa
16. Standard Chartered Investment Services Limited
17. Stanlib Kenya Limited
18. Zimele Asset Management Company Limited
19. Trustee and Investment Services Limited
20. Allan Gray (Kenya) Limited
21. Cytonn Asset Managers Limited
22. Altree Capital Kenya Limited
23. Jubilee Financial Services Limited
24. ABSA Asset Management Limited

If you wish to obtain a Fund Manager Licence in Kenya, please contact us on swanjiru@capitaregistrars.co.ke or by phone +254709747555.