Cytonn, CMA Tussle Conceives New Regulations for Alternative Funds

The Capital Markets Authority (CMA) has issued new draft regulations aimed at managing privately placed investment funds.

The new policies covering what CMA terms alternative investment funds come on the heels of the regulator’s tussle with Cytonn Investments over a similar issue.

The Capital Markets (Collective Investment Schemes) (Alternative Investment Funds) regulations of 2021 define alternative funds as a collective investment scheme in any legal form but established in Kenya.

CMA further elaborates that the new regulations cover any privately pooled investment vehicle which collects funds from two or more investors for the purpose of investing under a defined investment policy.

Once these regulations are enforced, no entity or person shall conduct or describe itself as an alternative investment fund without the regulator’s approval.

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Therefore, any fund falling within the description of an alternative investment must comply with the regulations 6 months after the effective date of the operation of the new rules.

On the other hand, any entity that fails to apply for registration under the new CMA rules shall cease to operate as an alternative investment fund.

Furthermore, all recognized alternative funds will be required to have a fund manager and clearly define their investment strategies, the purpose, and methodology to an investor.

The alternative fund, according to the CMA provisions, must have assets of at least 10 million shillings and accept a minimum of 1 million shillings from each investor. It must also have no more than 20 investors.

Other provisions in the draft regulations cover general obligations, responsibility, and transparency of alternative funds, inspection, and procedure for auction in the case of default.

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The new regulations also come not long after the CMA appeared before the National Assembly Finance and National Planning Committee where it was squeezed on its role in supervising the investments space following several high profile bursts.