Regulatory Alerts2012-05-30
Guidelines On Financial Resource Requirements For Market Intermediaries
These guidelines mandate that market intermediaries in Kenya maintain strictly defined minimum levels of paid-up share capital and liquid capital to enhance risk-based supervision. Licensed entities must perform regular, accurate calculations of their financial resources, apply specified haircut percentages to various asset classes, and account for liabilities on a gross basis. Intermediaries are strictly required to notify the Capital Markets Authority immediately if they fail to meet these thresholds or encounter significant financial or operational instability.
GUIDELINES ON FINANCIAL RESOURCE REQUIREMENTS FOR MARKET INTERMEDIARIES
PRELIMINARY
1—Introduction. 2—Interpretation. 3—Accounting treatment. 4—Financial Resources Requirement. 5—Paid-up share capital for licensed entities. 6—Liquid Capital Requirement for licensed entities. 7—Calculation of Liquid capital and required liquid capital. 8—Accounting for transactions on trade date basis. 9—Valuation of proprietary position. 10—Pairs of transactions. 11—No set- off. 12—Transactions in margined accounts. 13—Assignments. 14—Treatment of securities borrowing and lending agreements. 15—Treatment of re-purchase transactions.
LIQUID ASSETS
16—Liquid Assets. 17—Exclusions from liquid assets. 18—Assets provided to others as security. 19—Cash in hand and cash at Bank. 20—Amounts receivable from clients in respect of purchase of and subscription for securities. 21—Amounts receivable in respect of providing securities margin financing. 22—Amounts receivable from counterparties in respect of dealings in securities. 23—Cash provided as security for short selling. 24—Proprietory positions of licensed entities. 25—Amounts receivable from clearing houses, etc. 26—Amounts receivable under securities borrowing and lending agreements. 27—Amounts receivable under purchase transactions. 28—Miscellanious Assets.
RANKING LIABILITIES
29—Ranking Liabilities. 30—Amounts payable to clients, etc. 31—Amounts payable in respect of dealing in securities. 32—Provision of securities margin financing. 33—Short positions in securities and specified investment. 34—Securities borrowing and lending agreements. 36—Repurchase transactions. 37—Net underwriting commitments. 38—Off-exchange traded derivative contracts. 39—Interest rate swap agreements. 40—Foreign exchange agreements.
MISCELLANEOUS
41—Miscellaneous. 42—Other liabilities. 43—Licensed entities to notify the Authority of failure to comply with this Guideline. 44—Licensed entities to notify the Authority of circumstances relating to financial resources and trading activities and to submit returns in certain cases. 45—Licensed entities to submit returns to the Authority. 46—Licensed entities to provide information. 47—Approvals. 48—Remedial measures and administrative sanctions.
SCHEDULES
Schedule 1—Financial Resources Requirements. Table 1- Paid-up share capital. Table 2- Required liquid Capital. Schedule 2—Haircut Percentages.