This archive report was first published on 19 July 2021.
Kenya's Capital Markets Authority (CMA) has introduced draft regulations to govern investment-based crowdfunding platforms. The move aims to ensure transparency and accountability in the sector.
According to the draft Capital Markets (Investment Based Crowdfunding) Regulations, 2021, all persons operating or intending to operate an investment-based crowdfunding platform must obtain approval from the CMA. The regulations also outline specific requirements for licensing, including a minimum paid-up capital of KSh 10 million and an application fee of KSh 10,000.
Eligible crowdfunding participants include micro or small enterprises with a minimum of two years' operating track record and a good corporate governance record. Start-up entities with a good operating track record and a good corporate governance record are also listed as issuers.
The regulations also set limits on the aggregate amount of investment instruments that can be offered by an eligible issuer within a 12-month period. For medium-sized enterprises, the limit is KSh 100 million, while small enterprises are limited to KSh 50 million, and micro-enterprises to KSh 5 million.
Publicly listed firms and their subsidiaries, entities with poor corporate governance records, and those that intend to raise funds for onward lending or invest elsewhere are prohibited from raising funds through a crowdfunding platform.
Only sophisticated individuals are allowed to participate in crowdfunding investments, while retail investors are limited to KSh 100,000. Investors also have a cooling-off period of 48 hours from the date of close of the offer within which they may withdraw their investment.
The CMA is seeking stakeholder and public feedback on the draft regulations, with comments to be submitted by August 11, 2021.
