Money Manager Licence in Kenya

HOW TO ACQUIRE A MONEY MANAGER LICENCE IN KENYA

A money manager in Kenya is an entity licensed by the Authority to engage in the business of managing the online foreign exchange portfolio of an individual or institutional investor in return for a fee based on a percentage of assets under management.

To become a fund manager in Kenya, one is required to apply for a Licence to act as such from the Capital Markets Authority. As per the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017, there are three types of licenses one can get;

1. Dealing Online Foreign Exchange Broker

A dealing online forex broker functions similarly to a market maker. The broker licensed as a dealing online forex broker has the following characteristics:

• It opens client’s accounts and provides a trading platform to its customers.
• It provides access to market information to its clients.
• It constantly monitors the trader’s position or provides daily reports.
• The entity trades as the principal and market maker.

2. Non-Dealing Online Foreign Exchange Broker

A licensed non-dealing FX broker means CMA has authorized the broker to act as a link between the foreign exchange market and traders in return for a commission or mark-up in spreads. The main difference between a dealing and a non-dealing broker is that the latter can’t engage in market-making activities. It also provides a trading platform to its clients, but it can’t place orders on behalf of its clients. The majority of online brokers in Kenya are non-dealing FX brokers.

3. Money Manager

A licensed money manager Forex Exchange broker chooses and invests prudently in the forex market on behalf of their clients. The manager develops an appropriate strategy according to specific client’s needs and invested capital. A money manager manages all the client’s investments, takes positions, and undertakes financial analysis.

Regulatory framework in Kenya/Applicable laws

• The  Capital Markets Act.
• The Capital Markets (Online Foreign Exchange Trading) Regulations 2017.
• The Capital Markets (Licensing Requirements) (General) Regulations, 2002
• The Capital Markets (Corporate Governance) (Market Intermediaries) Regulations, 2011.

Compliance requirements of being a Money Manager

•  A money manager must observe high standards of integrity and fair dealing;
• To act with due skill, care, and diligence;
• To observe high standards of market conduct
• To act in the interests of the clients and avoid conflicts of interest.
• To maintain adequate financial resources to meet the foreign exchange business commitments and withstand the risks to which the business is subject;
• In the case of an online foreign exchange broker:
•  Ensure that all clients’ funds are held in a bank licensed under the Banking Act;
• Keep clients’ funds segregated from its funds and ensure that at no point shall the clients’ funds be used for margining, hedging, or as company assets, including where the company becomes insolvent;
• They must apply stringent governance and risk-management procedures.
• Comply with the Proceeds of Crime and Anti Money Laundering Act, 2009 and Prevention of Terrorism Act, 2012; No. 9 of 2009 No. 30 of 2012
• To organize and control internal affairs responsibly and clearly separate its front office and back office functions;
•  They must have efficient procedures and arrangements for addressing complaints by clients;
• Have adequate arrangements to ensure that all staff employed by the online forex broker or money manager are suitable, adequately trained properly supervised, and subjected to well-defined compliance procedures;
• To adopt and enforce written procedures with regard to communications with the public;
•  To appoint an independent auditor who holds a valid practicing certificate issued by the Institute of Certified Public Accountants of Kenya (ICPAK)

The requirements and documents for obtaining a Money Manager Licence in Kenya

• Application Form-Duly completed and executed (Form 1) in duplicate 
• A company incorporated in Kenya and limited by shares
• Certificate of incorporation
•  Memorandum and articles of association
• An agreement with an Online Foreign Exchange Broker licensed by the Authority (CMA)
•  The following Policies:

1. Client onboarding policy
2. Individual Investor Risk Assessment Policy
3. Risk management Framework for the company
4. Anti-Money Laundering and Know Your Client checks
5. Product sensitization framework including client appropriateness assessment
6. International Dispute mechanism to resolve customer disputes and complaints
7. Policy on Appointment of Employees
8. All relevant Service Level Agreements with other Online Foreign Exchange market service providers, where applicable.
9. A Chief Executive with experience of not less than five years and is a member of a professional body.
10. Have the necessary infrastructure including office space, equipment, and staff to effectively discharge its activities
11. Accounts
12. 6 months unaudited accounts plus 2 years where relevant
13. Evidence of Minimum Capital of Kenya Shillings Ten Million
14. Undertake to maintain at all times, liquid capital of Five Million shillings or eight percent of total liabilities whichever is higher.
15. Compliance and a clearance certificate from a licensed Credit Reference Bureau of shareholders and all key personnel.
16.  Letter from the foreign Online Forex Broker or Money Manager where the applicant is a subsidiary regulated in another jurisdiction
17.  Letter from the regulator where the Money Manager is regulated in another jurisdiction
18.  Appoint a Compliance Officer accredited by the Chartered Institute of Securities and Investments (CISI).
19.  Appoint an Anti-Money Laundering Reporting Officer who can also be the Compliance Officer.
20.  A statutory declaration by the directors that;

i)   The business of the company has, in their opinion, been satisfactorily maintained;

ii)  There have, in their opinion, arisen any circumstances adversely affecting the company’s trading or value of its assets;

iii)  There are any contingent liabilities because of any guarantees given by the company or any of its subsidiaries;

iv)  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.

• Board of Directors 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, and 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 who is a member of the Institute of Certified Secretaries in good standing.
• Shareholding Structure, detailing the number of shares, the percentage holding, and including the ultimate beneficial shareholding of all corporate shareholders and any existing Trusts if applicable.
•  Operating and IT system (describe the system in place or the system to be put in place once licensed)
• Details of staff (please note the requirement for risk management, compliance officer, and internal audit functions as per the Corporate Governance  regulations)
• An Internal Auditor and Chief Financial Officer
• A board charter that:

a)  Reconfirms the Board’s responsibility for the adoption of strategic plans, monitoring operational performance, the determination of policies and processes that ensure the intermediary’s risk management and internal controls;

b)  Reserves specific powers to itself and delegates other matters to the management of the market intermediary;

c)  Provides a code of conduct that addresses conflict of interest relating to directors and management which shall be regularly reviewed and updated as necessary;

d)  Identifies the key risk areas that require regular monitoring.

• Clear separation of roles and responsibilities of the Chairman and Chief Executive.
• Comprehensive Curriculum vitae for directors and key personnel.
•  Duly filled and executed Fit & Proper Forms for directors and key personnel.
• Valid certified copies of the Police Clearance Certificate for directors and key personnel.
• The board is composed of a balance of executive and non-executive directors; At least one third be independent and non-executive directors of diverse skills or expertise (this should be disclosed in the annual report)
• Establishment of an audit committee of at least three independent and non-executive directors by the board who shall report to it.
•  Application fee of KES 10,000

Examples of Money Managers in Kenya

• Standard Investment Bank (SIB) Limited
• FX Pesa
• Scope Markets
• FXTM Kenya
• Pepperstone Kenya