Licensing shift: What market intermediaries need to know about the new CMA rules

Under the new regime, any person seeking to operate as a market intermediary or intermediary service platform provider, must apply for licensing using a standardised CMA application form and pay the prescribed fee.

This harmonised approach replaces the previously fragmented licensing architecture and is intended to promote regulatory clarity and consistency.

For intermediaries, however, the changes extend well beyond administrative compliance and require meaningful financial, operational and governance realignment.

A central feature of the framework is the recalibration of minimum capital and liquidity thresholds across licence categories.

Investment banks must now maintain minimum paid‑up share capital of Sh150 million and liquid capital of at least Sh50 million or eight percent of total liabilities, whichever is higher. Broker‑dealers are required to hold Sh70 million, stockbrokers Sh50 million, and dealers Sh20 million in paid‑up capital.

Custodians face the most stringent requirements and must either be banks licensed by the Central Bank of Kenya, or licensed financial institutions capable of operating as custodians, including maintaining paid‑up capital of at least Sh1 billion and liquid capital of Sh50 million or eight percent of liabilities.

These enhanced financial thresholds are designed to strengthen investor confidence by ensuring that intermediaries can meet short‑term obligations and withstand periods of market stress. By reducing the likelihood of intermediary failure, the CMA is directly addressing systemic risk, a historical contributor to market instability and investor losses.

The regulations also formally recognise digital investment platforms and algorithm‑driven advisory services, closing a long‑standing regulatory gap. Previously, many digital platforms operated through partnerships with licensed intermediaries.

Under the new framework, intermediary service platform providers supporting mobile‑based and app‑driven investment services must meet detailed licensing requirements, including adequate capitalisation, secure technological infrastructure, robust risk management frameworks, and sound data protection policies.

Algorithm‑driven advisory platforms face additional obligations such as documented investment methodologies, structured client onboarding procedures and secure data management systems. This reflects the CMA’s intention to modernise oversight while ensuring fintech innovations are subject to the same standards of accountability and investor protection as traditional intermediaries.

A notable procedural innovation is the introduction of an approval-in-principle mechanism. Where an application substantially meets regulatory requirements, the CMA may grant approval‑in‑principle, allowing the applicant to establish systems, infrastructure, and staffing.

However, regulated activities may not commence until a final licence is issued. Importantly, approval‑in‑principle is valid for six months only, after which an applicant who has not satisfied all conditions must apply afresh. This provides a defined regulatory runway while enforcing discipline around execution timelines and operational readiness.

Reporting and disclosure obligations have also been significantly expanded. Investment advisers, broker‑dealers, stockbrokers, dealers, fund managers and custodians must now submit monthly risk‑based capital adequacy reports and management accounts within fifteen days of each month‑end.

Audited financial statements and audited capital adequacy reports must be filed within three months of the financial year‑end.

Fund managers face additional quarterly and semi‑annual reporting obligations on managed portfolios, enhancing transparency around client asset management.

Prescribed disclosure formats further standardise reporting and strengthen the CMA’s supervisory capacity.

The scope of permissible activities for investment banks has also been broadened. In addition to corporate finance, advisory, broking and dealing, investment banks are now expressly authorised to engage in market‑making. The framework further allows licensees, subject to CMA approval, to hold multiple licences, enabling institutions to scale or diversify their regulated activities within a single supervisory architecture.

That said, concerns remain around regulatory overlap, particularly between the new licensing framework and the existing Collective Investment Scheme (CIS) regime.

Fund managers, custodians and trustees are now subject to dual layers of regulation: entity‑level licensing and product‑level CIS oversight.

While the policy intent is to strengthen investor protection through institutional and product‑based supervision, the absence of explicit coordination mechanisms may increase compliance complexity, duplicate reporting obligations and raise costs, especially for managers operating multiple schemes or digital distribution models.

Beyond financial thresholds, the regulations place renewed emphasis on governance and integrity through expanded fit‑and‑proper assessments for directors, senior management and key personnel.

These assessments extend beyond professional qualifications to cover probity, past regulatory conduct, financial soundness and criminal history, reinforcing the CMA’s focus on ethical leadership and responsible stewardship of investor assets.

The framework also introduces clearer restrictions on the marketing of securities. No person may market securities in Kenya unless licensed under the regulations, while licensed intermediaries seeking to market securities outside Kenya must obtain prior written CMA approval.

These provisions have important implications for cross‑border offerings, digital distribution channels and diaspora‑focused investment products.

To support implementation, existing licences remain valid, with intermediaries granted a twelve‑month transition period to align with the new requirements, which took effect in December 2025.

Over‑the‑counter platforms and intermediary service platform providers operating at commencement must similarly regularise their status within one year. While this transition window provides some breathing space, it should not be mistaken for regulatory leniency.

The scale and depth of the reforms mean compliance will require deliberate planning, capital restructuring, governance reviews, and system upgrades.

Taken together, the new licensing regulations represent a decisive step towards a more resilient, transparent, and future‑ready capital markets ecosystem.

For investors, the reforms promise stronger safeguards and more credible market institutions. For intermediaries, the message is clear: early preparation, operational readiness, and full compliance are no longer optional, but essential for survival and sustainable growth in Kenya’s evolving financial landscape.

The writer is an EY Law Associate.