Regulation of Financial Markets KASNEB Notes

Download Regulation of Financial Markets Notes




This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to comply with the regulatory framework governing financial markets.


A candidate who passes this paper should be able to:

  • Comply with the legal provisions relating to financial markets, including the laws of contract and agency
    • Comply with the licensing regulations of the securities exchange
    • Comply with the guidelines and rules of the central depository system
    • Identify the offences and penalties relating to trading in securities
    • Demonstrate an understanding of the processes and law of anti-money laundering
    • Maintain securities registers, accounts and records


Introduction to Law

  • Nature, purpose and classification of law
  • Sources of law
  • The court system; establishment, composition and jurisdiction;

Law of contract

  • Definition and nature of a contract
  • Classification of contracts
  • Formation of a contract
  • Terms of a contract
  • Vitiating factors
  • Illegal contracts
  • Discharge of contract
  • Remedies for breach of contract
  • Limitations of actions

Law of agency

  • Nature of agency
  • Formation of agency
  • Special classes of agents: factors, banks, brokers
  • Authority of the agent
  • Duties and rights of the principal and agent
  • Personal liability of the agent
  • Termination of agency

Regulation of financial markets

  • Historical development of the law and regulations governing financial markets
  • Need for regulation
  • Regulatory strategies in financial services
  • Financial regulators
  • Central Bank of Kenya
  • Capital Markets Authority
  • Deposit Protection Fund
  • Insurance Regulatory Authority
  • Retirement Benefits Authority
  • Sacco Societies Regulatory Authority
  • Institute of Certified Investment and Financial Analysts(ICIFA)
  • Professional bodies in financial services
  • Regulations in the international financial markets
  • The International Organisation of Securities Commissions(IOSCO) principles for self regulation

Regulations of capital markets

  • Capital Markets Authority
  • Investor Compensation Fund Board
  • The Capital Markets Tribunal
  • The Capital Markets Fraud Investigations Unit
  • The International Organisation of Securities Commissions principles relating to the regulator

Download Regulation of Financial Markets Notes

Regulation of financial market intermediaries

  • Stockbrokers
  • Stock dealers
  • Investment banks
  • Investment advisers
  • Fund managers
  • Credit rating agencies
  • Collective investments schemes

–           Custodians

–           The International Organization of Securities Commissions(IOSCO) principles for credit rating agencies, collective investment schemes and market intermediaries

Raising capital in the securities market

  • Types of shares
  • Private offers
  • Public offers; listing by introduction ,offer by tender and rights issue
  • Prospectus /information memorandum
  • The International Organisation of Securities Commissions(IOSCO) principles for issuers

Central depository system

  • The Central Depository Settlement Corporation
  • Establishment of the central depository
  • Duties of a central depository
  • Central depository agents
  • Rules and regulations of the central depository
  • Remedies for breach of duties
  • Security measures
  • Disclosure of information by central depository agents
  • Central Depository Guarantee Fund

Immobilisation and dematerialisation

  • Meaning
  • Prescription of securities for immobilisation
  • Transfer to a central depository or nominee company
  • Operation of securities account
  • Restriction of trade in eligible securities exchange
  • Establishment
  • Membership
  • Rules
  • Listing and post listing requirements
  • Self Listing of the exchange
  • Cross border listing

Securities transactions

  • Book entry of transactions and prohibition
  • Records of depositors
  • Suspended securities
  • Suspension and delisting of securities
  • Charging or mortgaging of securities
  • Bonus and rights issue
  • Prohibition of dealings in book entry securities
  • Insider trading
  • The International Organisation of Securities Commissions(IOSCO) principles for enforcement of securities regulation

Securities registers, accounts and records

  • interests in securities
  • Restrictions in securities transactions
  • Register of interests in securities
  • Types of securities accounts
  • Maintenance of records
  • Accounts statements
  • Record of depositors
  • Audit of accounts, records and registers

Corporate governance

  • Meaning of corporate governance
  • Application of corporate governance principles in financial markets
  • The role of capital market authorities in enforcement of corporate governance
  • The International Organization of Securities Commissions(IOSCO) principles for cooperation in regulation

Prevention of money laundering

  • Meaning of money laundering
  • Component of money laundering
  • Anti money laundering legislation
  • Anti Money Laundering Advisory Board
  • The Assets Recovery Agency
  • Criminal Assets Recovery Fund
  • Prevention of terrorism regulations
  • Counter Financing of Terrorism Inter-Ministerial Committee: objectives, functions and powers
  • The Financial Reporting Centre: objectives, functions and powers
  • Due diligence requirements
  • Wire transfers

Emerging issues and trends

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