Collective Investment Schemes are more frequently known as ‘investment funds’, ‘mutual funds’ or simply ‘funds’. They invest in assets, such as bonds, equities or cash. The collective assets owned by the fund are called a portfolio, and they are managed by a professional fund manager. How to Register Collective Investment Scheme in Kenya
Your money is pooled together with that of other investors, and spread over the whole range of assets within the fund. Your investment in a fund is divided into units; the number of units held represents your proportionate ownership of the fund’s overall assets, and the income and capital growth that those assets may generate. The prices of these units fluctuates because the underlying value of the assets will rise and fall – and since the total value of the fund is divided by the number of units issued, your individual stake will rise and fall to reflect this.
Different funds take different levels of risk. Some are relatively low risk, for example some might invest mostly in cash. Others are more risky, possibly investing in emerging companies or markets with the hope of higher or faster growth.
Always seek professional advice to help select funds that suit your risk profile and which could help achieve your financial goals. This advice should consider your:
- Risk appetite
- Financial situation
- Investment goals, and
- Knowledge of the fund.
Why choose an investment fund?
We list below some of the key reasons you might consider for investing in a fund:
Funds typically spread their investment across different companies, asset types and geographical regions, providing a benefit known as ‘diversification’. When one investment is down, another might be up, and you’re not taking a chance on the fortunes of one single asset. This means your risk overall is reduced. And by pooling money with other investors, your buying power and access to assets and markets is greater than if you were buying single assets on your own. However, investors should be aware that diversification and asset allocation do not fully protect against market risk.
Ease of use
The day-to-day running of your investment is designed to be straightforward. A fund manager invests on your behalf and you’ll receive regular reports on how your money has been invested. You can choose whether you’d like any dividends to be automatically reinvested, or to receive them as regular income payments. If you choose regular income through dividend payments this may reduce the potential for capital growth.
Thanks to their ‘bulk-buying’ power, investment funds can be more cost-efﬁcient for investors than buying a high number of individual investments on their own. They spread ﬁxed costs, such as the charges for safekeeping of assets across all investors in the fund. So large transactions can be carried out at a fraction of the cost you’d pay if you were buying directly. While managers aim to keep costs low for investors, there are some additional costs that need to be considered on top of annual management fees. These include dealing fees when units in the fund are bought and sold.
Professional investment management
Investment funds allow you to access the expertise of full‑time, dedicated fund managers and their teams of analysts who have access to market information outside the scope of the average investor. Using the latest research, they are constantly monitoring markets for potential investment opportunities. Their decisions on what to buy and sell – consistent with a fund’s stated investment objectives – reflect the changes they detect in economic or market conditions.
Choice of regions and sectors
You can take advantage of a wide variety of investment styles, sectors and geographical regions. You can opt for a fund that invests in a number of global regions, which can help cushion you against big market swings in any one area. Or you can target a speciﬁc region, and link your investment more closely to the fortunes of that locality. You can also, for example, focus on particular sectors, such as natural resources.
Capital at risk – Remember, all financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed.
Procedure on How to Register Collective Investment Scheme in Kenya
- To register a collective investment scheme, the applicant has to contact the Capital Markets Authority offices.
- The applicant has to make sure he or she has all the required documents that are required for this process to be successful and they can be found under the “Required Documents” section of this page or in the Application form and the Collective Investment Schemes Checklist.
- Payment of appropriate fees should be made and that can be found under the “Fees” section of this page or in the Capital Markets Authority’s CMA Service Delivery Charter.
- On completion of this process, the Authority shall advise the promoter within thirty days of the receipt of the application for registration of a collective investment scheme whether registration has been granted.
Required Documents to Register Collective Investment Scheme in Kenya
- The incorporation documents
- The information memorandum
- Audited reports for the preceding 3 years of the proposed fund manager, where applicable
- Audited reports for the preceding 3 years of the proposed trustee
- Audited reports for the preceding 3 years of the proposed custodian
- A letter of consent to act as a fund manager
- A letter of consent to act as a trustee
- A letter of consent to act as a custodian
Office Locations & Contacts
- Capital Markets Authority
Embankment Plaza, 3rd Floor Longonot Road, off Kilimanjaro Avenue, Upperhill
P.O Box 74800 – 00200
Tel: +254- 20- 2264000/ 2264900 / 2221910/ 2221869/ 2226225
Cell: +254 722 207767
Fax: +254- 20-342825
Location: View Map
Eligibility to Register Collective Investment Scheme in Kenya
No person is allowed to carry on or hold himself out as carrying on business as a collective investment scheme unless he is approved as such by the Capital Markets Authority.
Instructions to Register Collective Investment Scheme in Kenya
An application for consent to register a collective investment scheme should be submitted to the Authority by the promoter of a proposed collective investment scheme, and shall be accompanied by –
(a) the prescribed application fee;
(b) the following documents:
- draft incorporation documents of the collective investment scheme;
- memorandum and articles of association of the promoter;
- memorandum and articles of association of the proposed fund manager;
- business plan;
- one bank reference; and
- two professional or business references.
(c) such other documents that may be required by the Authority.
Consent granted for the registration of a collective investment scheme shall lapse after three months.
An application for registration of a collective investment scheme shall be made to the Authority by a promoter of the collective investment scheme, in triplicate in Form 1 and accompanied by the required documents.
COLLECTIVE INVESTMENT SCHEMES CHECKLIST
Required Information to Register Collective Investment Scheme in Kenya
- Name and address of the fund
- Legal form of the collective investment scheme
- Name of the country or jurisdiction where the collective investment scheme is constituted
- Title of the law under which the collective investment scheme is or is to be constituted
- Name, address, place of birth and citizenship of key officers
- Educational and professional qualifications of the key officers
- Details of business, occupation or employment history of the key officers
- Two personal references and a bank reference of the key officers
- Names, addresses and business activities of each of the collective investment schemes fund manager, administrators, investment advisers, custodians and trustees
- Prior registration
Need for the Document
A Collective Investment Scheme (CIS), as its name suggests, is an investment scheme wherein several individuals come together to pool their money for investing in a particular asset(s) and for sharing the returns arising from that investment as per the agreement reached between them prior to pooling in the money.
A collective investment scheme includes an investment company, a unit trust, a mutual fund or other scheme whether or not established or organized in Kenya which-
- collects and pools funds from the public or a section of the public for the purpose of investment;
- is managed by or on behalf of the scheme by the promoter of the scheme;
and includes an umbrella scheme whose shares are split into a number of different class schemes or sub-schemes, each of which is managed by or on behalf of a common promoter, but does not include
- a body corporate incorporated under any law in Kenya relating to building societies, co-operative societies, retirement benefit schemes, credit unions or friendly societies;
- an arrangement where each of the holders of the shares is a body corporate in the same group as the promoter;
an arrangement where each of the holders of the share is a bona fide employee, former employee, wife, husband, widow, widower, child, stepchild of the employee or former employee of the directors or shareholders of a body corporate in the same group as the promoter;
- arrangements where the receipt of contributions from the holders of shares in the collective investment scheme constitutes the acceptance of deposits in the course of a business which is a deposit-taking business for the purposes of the Banking Act;
- contracts of insurance.
Information which might help
NOTE: Registration of a Collective Investment Scheme (CIS) is a two stage process. Pursuant to Regulation 3 of the Capital Markets (Collective Investment Schemes) Regulations, 2001 the Authority first considers and grants consent for the registration of the CIS. Thereafter the Authority considers an application for registration of the CIS pursuant to Regulation 5. The application for registration of a CIS should be made to the Authority within a period of three (3) months from the date of issue of the consent to register the CIS.
The Capital Markets (Collective Investment Schemes) Regulations, 2001
Collective Investment Schemes Checklist
The Capital Markets Act – Amended 2016
Application Processing Times and Procedures
CMA Service Delivery Charter
The Capital Markets Authority is an independent public agency established by an Act of Parliament, Cap 485 A under the Ministry of Finance. The Authority came into being on December 15, 1989 when the Act was passed and was inaugurated in March 1990.
The CMA is a regulating body charged with the prime responsibility of supervising, licensing and monitoring the activities of market intermediaries, including the stock exchange and the central depository and settlement system and all the other persons licensed under the Capital Markets Act. It plays a critical role in the economy by facilitating mobilization and allocation of capital resources to finance long-term productive investments.
The Authority derives its powers to regulate and supervise the capital markets industry from the Capital Markets Act and the Regulations issued there under. The regulatory functions of the Authority as provided by the Act and the regulations include the following:
- Licensing and supervising all the capital market intermediaries
- Ensuring proper conduct of all licensed persons and market institutions.
- Regulating the issuance of the capital market products (bonds, shares etc )
- Promoting market development through research on new products and institutions.
- Promoting investor education and public awareness
- Protecting investors’ interest
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