Regulation of Financial Markets – KASNEB Syllabus

PAPER NO.7  REGULATION OF FINANCIAL MARKETS

GENERAL OBJECTIVE

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.

LEARNING OUTCOMES

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

CONTENT

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

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 ,offerbytenderand 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