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Regulator to enforce reporting by firms in private placement

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CMA chief executive Paul Muthaura (left) and regulatory, policy and strategy director Luke Ombara at the launch of Soundness Report in Nairobi last week. PHOTO | SALATON NJAU | NMG

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Summary

  • Firms seeking to raise cash through sale of shares or short-term debt via private placements will be required to notify the CMA.
  • The regulator says reporting from private offerings market has been “limited” despite its high potential for funding cash-strapped firms.
  • CMA sees improved reporting helping grow and develop the market as an alternative route for the private sector to access finance.

Companies seeking to raise cash through sale of shares or short-term debt via private placements will in the near future be required to notify the capital markets regulator.

The Capital Markets Authority (CMA) says reporting from private offerings market has been “limited” despite its high potential for funding cash-strapped firms.

It sees improved reporting helping grow and develop the market as an alternative route for the private sector to access finance.

Banks have become choosy when lending because of interest rate cap law.

At present, the regulator has not made it mandatory for non-listed companies selling shares through private placements or those raising capital through commercial papers to notify it first, making it optional for issuers.

Securities from such deals end up trading on over the counter market.

The CMA has in the past, however, stepped in and warned the public against buying shares in some companies based on advertisement in the media.

READ: CMA cautions investors against Cembe Millers offer

ALSO READ: CMA puts brakes on property crowd-funding plan

“Going forward, to help understand the level of activity in the private offers market, the authority shall enforce provisions in section 30C of the Act which require that it be notified through information notices by issuers raising funds through private offers (both in commercial paper and equity),” the CMA said in the Soundness Report for second quarter.

“To this end, the authority is in the process of developing a framework for ensuring that all private offer transactions are made known to the authority.”