The regulatory changes target private markets including private equities, crowdfunding and venture capital types of investments.
The Capital Markets Authority (CMA) is fast-tracking changes to both regulations and the Act to cover a regulatory gap that has been manipulated by private investments.
CMA Chief Executive Officer Wyckliffe Shamiah said while private markets remain good, there is a need for ‘certain’ interventions.
Mr Shamiah said the authority’s legal framework does not fully support their intention of developing and regulating the market.
“We are looking at amending quite a raft of our regulations and even the Act because it is necessary for us to have the changes and then facilitate players who are potential issuers to do exactly what our intention is,” he said.
These changes are targeted at private markets which include private equities, crowdfunding and venture capital type of investments.
The changes in regulations and Act are targeted at avoiding situations like the Cytonn Investments’ high yield scheme which is struggling to pay investors their returns on time from its real estate projects.
Mr Shamiah said the authority is at the tail end of the regulations and a draft will be made public.
He revealed that the authority, in coming up with the changes, has looked at collective investment scheme regulations which are due for revision, whistleblower provision guidelines and crowdfunding legal framework.
Others are the credit rating and the share buyback guidelines which he said are to be operationalised soon.
“We have twin mandate of regulation and development which is actually very difficult to balance at some point because you regulate and also facilitate development,” he said.
“But in the process, we have also noted there has been a lot of interest in what we have seen called private markets.”
Private markets unlike public (markets), give an opportunity for the parties involved (the one with funds and the one requiring funds) to interact which gives rise to private equity, private lending, venture capital and the likes.
Shamiah said these private markets were not under their domain as the regulator until the Finance Act, 2020
“We realised this market has given investors the opportunity to invest in and it is so because sometimes returns will be high, but we always caution that since some of their products may not be regulated, there is also high risk,” he said.
He said it would be important for players to discuss and agree on what changes must be made to the law so that those who participate in the private market are protected.
“In other jurisdictions where private markets have been active, there are regulations which are very clear on who can invest, how much they can put and of course just ensuring the issues of misselling do not take place,” he said.
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