The Capital Markets Authority (CMA) has reviewed the guidelines provided by credit rating organisations to improve best practices regarding how sovereign or business ratings are carried out in Kenya.
As a result of the review, a draft of the Capital Markets (Credit Rating Agencies) Regulations, 2022 has been produced as per Section 12(1) (h) of the Capital Markets Act, which may be found in Chapter 485A of the Laws of Kenya.
- The CMA evaluated credit rating agency criteria to improve sovereign or business ratings in Kenya
- The licence and recognition process for credit rating organisations, the rating process, monitoring, and disclosure of rating definitions and justification are all outlined in the proposed regulations
- A draft of the Capital Markets (Credit Rating Agencies) Regulations, 2022 has been produced as per Section 12(1) (h) of the Capital Markets Act, which may be found in Chapter 485A of the Laws of Kenya
- The laws would also offer investor safeguard and a greater level of control of credit rating firms by the Regulator
The proposed regulations, which are open to stakeholder feedback, are intended to replace the present rules for the approval and registration of credit rating agencies, which were published in November 2001.
In addition, this evaluation will ensure that the Statutory Instruments Act is adhered to, as that is another goal of the process.
The mechanism for licencing and recognising credit rating agencies, monitoring and the rating process, as well as the disclosure of rating definitions and reasons, will all be outlined in full in the regulations now in draft form.
According to a statement made by the CMA in a notice that was made public,
“The laws would also offer for investor safeguard and a greater level of control of credit rating firms by the Regulator.”
A credit rating agency is an institution that examines the degree to which various issuers of securities are financially reliable and issues ratings to such securities. These ratings are used to help investors make investment decisions.
The CMA has granted registration and operating permission to five credit rating agencies. These agencies are as follows: Agusto & Company Limited, Global Credit Rating Company (GCR), A.M. Best Rating Services Limited, Metropol Corporation Limited, and CARE Ratings.
Until September 16, the regulatory body will collect comments from various parties regarding the draft regulations.
An Act of Parliament formed the Capital Markets Authority, also known as Cap. 485A, placed it under the purview of The National Treasury and Planning. When the Act was finally signed into law on December 15, 1989, the Authority was officially established, and its first meeting was held in March of 1990.
The CMA is a regulatory body that is charge of the primary responsibility for supervising, licencing, and monitoring the activities of market intermediaries.
These market intermediaries include the stock exchange, the central depository and settlement system, and all other persons licenced under the Capital Markets Act. It is essential to the functioning of the economy because it paves the way for the mobilisation and distribution of financial resources for the purpose of financing long-term productive investments.
The Capital Markets Act and the Regulations that were enacted there are the primary sources from which the Authority obtains its authority to regulate and supervise the capital markets business.
The following is a list of the regulatory functions that the Authority is responsible for in accordance with the Act and the regulations:
- granting licences to and monitoring the activities of all capital market intermediaries
- ensuring that all licenced individuals and market institutions behave in an appropriate manner.
- Governing the distribution of the financial products available on the capital market (bonds, shares etc.)
- Research on new companies and products is being conducted in order to encourage the growth of existing markets.
- Increasing the level of public knowledge as well as investor education
- ensures the protection of the interests of investors
- Constitutive Elements of the Board
The Board is responsible for guiding the Authority regarding its overarching policies and providing leadership. Its dedication, professionalism, diversity of talent and experience, and independence of mind are crucial components in the Authority’s ability to carry out its purpose successfully.
Protecting the interests of investors, the government, employees, issuers of securities, and market intermediaries is the board’s primary duty. Other responsibilities fall under this category as well.