Capital Markets

CMA wants foreign investors allowed to fully own listed companies by 2016

Foreigners could own up to 100 per cent of firms listed on the main segment of the Nairobi Securities Exchange (NSE) if a proposal by regulator Capital Markets Authority (CMA) goes through.

The raised stake is meant to attract more foreign investors to the bourse including firms seeking to list on the NSE. Current legal provisions allow a listed firm to be up to 75 per cent owned by foreigners.

If the proposal becomes law, NSE would be included in the widely followed Morgan Stanley Capital International (MSCI) indices. The MSCI has a global market following and only covers bourses allowing foreigners to hold up to 100 per cent of listed companies.

“We have a proposal saying we allow up to 100 per cent of the shareholding of a listed firm to be owned by foreigners up from the current 75 per cent,” said Luke Ombara, acting CMA director for regulatory, policy and strategy Thursday.

Mr Ombara added the proposal may be modified to have the Treasury Cabinet secretary prescribe the portion foreigners can own in strategically important companies or recently listed firms at least in part owned by the government.

The amendments will be made in the Budget proposals for 2015/16 fiscal year so the legal provision could be effective from January 2016.

The changes will see foreigner participation at the bourse rise above Tanzania that recently opted to cap foreign ownership at 75 per cent, up from 60 per cent.

Dar restricts foreign capital, even putting other East Africa Community citizens in the category. It, however, is now considers Kenyans and other East Africans locals in market trading.

Mr Ombara was introducing discussions on reforms to be put before the Treasury for adoption in the next Budget.

He said the suggestions would help Kenya become a regional financial services hub. Stakeholders in the stock markets, the Treasury amongst others were represented.

They explored having all market intermediaries licensed by the CMA make contributions to the Investors Compensation Fund (ICF) based on the size operations as measured by revenue, client base or assets held under custody.

“The targeted objective is to operationalise the ICF in a sustainable manner,” said CMA in a brief. The fund currently pays out Sh50,000 to people who may have lost cash in a collapsed brokerage.

A key proposal is to remove withholding tax on dividends for individuals up to a maximum of Sh100,000 payout. Currently the withholding tax stands at five per cent for locals and 10 per cent for foreigners.

The CMA has also proposed credit rating fees charged by rating agencies registered with the authority be exempted from the valued added tax.

The CMA on top wants condition that issuers of securities are rated by a CMA-registered agency scrapped and instead issuers be graded by any entity compliant with International Organisation of Securities Commissions Credit Rating Agencies Code of Conduct. This is expected to encourage even foreign companies list securities locally after being rated by more foreign agencies.

“The targeted impact is to provide for an alternative risk assessment mechanism to the investors,” said the regulator’s brief.