NAIROBI STOCK EXCHANGE LIMITED
MANAGEMENT
&
MEMBERSHIP
RULES
CONTENTS INTERPRETATION ... 3 DEFINITIONS ... 4 MANAGEMENT ... 8 1. The Board ... 8 2. Committees... 9 3. Proceedings of Committees ... 14
4. The Chief Executive... 16
5. Board and Committee Members Allowances ... 17
6. Employees ... 18
MEMBERSHIP ... 19
1. Qualifications for Membership... 19
1.1 Qualification for full Membership ... 19
1.2 Qualification for Associate Membership. ... 19
2. Application Procedure... 19
3. Bank Guarantee... 19
4. Independence ... 20
5. Suspension and Expulsion... 20
6. Liability of directors and officers... 20
7. Floor Traders and Authorised Representatives... 20
8. Transfer of Membership... 21
9. Company Name and Address ... 21
APPENDIX A... 23
PART 1: MEMBERSHIP FEES ... 23 PART 2 : SITTING ALLOWANCES FOR MEMBERS OF THE BOARD 23
INTERPRETATION
The definitions used in the Capital Markets Act, Cap. 485A of the Laws of Kenya (including the Regulations and Guidelines issued thereunder), and the articles of association of Nairobi Stock Exchange shall apply to these rules.
Unless inconsistent with the context, the singular includes the plural and the use of either gender includes the other.
Headings are purely for reference purposes and shall not be taken into account in the interpretation of the rules.
DEFINITIONS
The definitions contained herein shall be as prescribed under the Capital Markets Act Cap. 485A (including Regulations and Guidelines issued thereunder) and where appropriate, are repeated verbatim.
In these rules unless the context otherwise requires-
‘Act’ refers to the Capital markets Act (Cap. 485A) and the Regulations and Guidelines issued thereunder.
‘Articles’ refers to the articles of association of the Exchange. ‘Authority’ refers to the Capital Markets Authority.
‘Board’ refers to the Board of Directors of the Exchange.
‘authorised securities dealer’ means a person authorized to deal in securities and operate in a specified market segment as may be prescribed by the Authority.
‘bad delivery’ means a delivery that:
(i) does not comply with the delivery requirements under the Settlement rules and is not approved for registration by the Exchange; or
(ii) is rejected by the registrar as not complying with the requirements. ‘bidding advance’ refers to the allowable margins within which a trader may
move the price of a security up or down during trading.
‘Chairman’ refers to the Chairman of the Board of Directors of the Exchange. ‘Chief Executive’ refers to the Chief Executive Officer of the Exchange.
‘Committee’ means a committee of the board of the Exchange constituted and assigned a specific mandate as provided under these rules, under the general direction and guidance of the board.
‘Companies Act’ refers to the Companies Act, Chapter 486 of the Laws of Kenya.
‘cornering the market’ shall have the same meaning as prescribed in the Act. ‘daily Trading Summary Schedule’ is a schedule in which all transactions
dealt by a member in a trading session are recorded.
‘dealer’ means a person who carries on the business of buying, selling, dealing, trading, underwriting or retailing of securities whether or not he carries on any other business.
‘dealing in securities’ means making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into-
a. any agreement for or with a view to acquiring, disposing of, subscribing for or underwriting securities; or
b. any agreement the purpose or intended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the price of securities.
‘dealing spread’ refers to the allowable price margin within which a deal may move up or down during trading.
‘delivery’ is the process of transferring documents of title, duly executed transfer forms stamped by the Exchange, together with such other
documents as may lawfully be required by the Exchange and the registrar, on or after settlement due date, for purposes of registration. ‘delivery confirmation schedule’ refers to the Schedule under Rule 2.3, 2.4
and 2.5 of the Settlement Rules.
‘delivery vs payment’ means presentation of the transfer documents against payment for the securities at the Exchange.
Exchange’ refers to Nairobi Stock Exchange Limited.
‘executive director’ means a Director of a member, by whatever name described who has executive responsibilities within a Member.
‘failed delivery’ refers to failure to deliver documents of title by the stipulated time.
‘good delivery’ refers to the delivery of valid documents for registration of a transfer of ownership and the issuance by the Registrar of title of a document evidencing change or transfer of title.
‘Issuer’ means a company or other legal entity incorporated or established under the laws of Kenya that offers securities to the public or a section thereof whether or not such securities are the subject of an application for admission or have been admitted to listing.
‘institutional investor’ means a person resident in Kenya, whose ordinary business is to hold, manage, or invest funds in connection with retirement benefits, insurance contracts, mortgage and saving schemes, and any fund or scheme in the nature of a collective investment or a unit trust. ‘licenced full or associate member’ means a full or associate member who holds a valid licence from the Authority.
‘listed’ means admitted to the Official List of The Exchange, and listing shall be construed accordingly.
‘matching’ refers to the process within the Exchange by which the Sale Transfer Form(s) and documents of title are paired with the corresponding Purchase Transfer Form and payment cheque (consideration) for each transaction.
‘material information’ refers to the information that may affect the price of a company’s securities or influence investment decisions. Every company whose securities are traded on a securities exchange, shall disclose any such material information including:
a) a merger, acquisition or joint venture; b) a block split or stock dividend;
c) earnings and dividends of an unusual nature; d) the acquisition or loss of a significant contract; e) a significant new product or discovery;
f) a change in control or significant change of senior management involving the Chairman or Chief Executive;
g) a call of securities for redemption;
h) a decision on additional public issue of securities; i) the purchase or sale of a significant asset;
j) a significant labour dispute;
k) a significant law suit against the issuer;
l) establishment of a programme to make purchases of the company’s own shares;
n) any other peculiar circumstances that may prevail with respect to the company or the relevant industry.
‘member’ refers to a body corporate admitted to membership of the Nairobi Stock Exchange Limited as a full or associate member.
‘odd lot’ is a lot comprising less than the minimum tradable board lot for the relevant market segment.
‘odd lots board’ is the designated board for trading of odd lots.
‘official List’ means a list specifying all securities which have been admitted to listing on any of the market segments of a securities exchange
‘overbidding’ means a situation where a floor trader halts a transaction that is about to be concluded by offering to buy at a better price that is one spread higher than the price about to be dealt at for at least 50% of the lot on offer, the balance being sufficient to remain as a lot on the board. ‘payment’ refers to the fulfilment of the buyer’s obligations in a transaction by
delivering a completed Purchase Transfer Form and cheque for the consideration to the Exchange which shall receive value only upon clearance of such cheque.
‘principal officer in relation to a member means an officer, by whatever name called, whose primary responsibility is the management of the day to day affairs of a Member or Associate Member.
‘private transaction’ means a transaction in a listed security of a non-commercial nature that is carried out outside the non-commercial trading processes pursuant to Section 31 (1A) of the Act.
‘representative’ means a representative of any person licensed by the Authority who is in the employment of the licensed person and plays a critical role in that company, and includes a trader, director, general manager, analyst, or any other person employed by the licensee who plays a critical role;
‘rules’ refers to the rules of the Exchange.
‘seat’ means the rights and privileges of a member.
‘secretary’ shall include any person appointed to perform the duties of secretary, including one appointed to do so temporarily. ‘securities’ means:
a. debentures or bonds issued or proposed to be issued by a government;
b. debentures, shares, bonds, commercial paper or notes issued or proposed to be issued by a body corporate;
c. any right, warrant, option or futures in respect of any debenture, shares,
bonds, notes or in respect of commodities;
d. any unit, interest or share offered under a collective investment scheme; or
e. any instruments commonly known as securities but does not include –
(i) bills of exchange; (ii) promissory notes; or
(iii) certificates of deposits issued by a bank or financial institution licensed under the Banking Act.
‘settlement’ refers to the fulfilment of the obligation arising from a transaction including payment to the seller and delivery of documents evidencing title to the buyer.
‘slip number (transaction number)’ is the unique individual number appearing on the trading summary, by which transactions are identified. ‘special boards’ are boards other than the normal boards including, prompt lot board and foreign investors board. These boards are set up for a specific purpose. Their rules shall differ in some or all respects from the rules
governing the normal boards.
‘special lots’ are lots other than normal board lots and include lots governed by special rules.
‘T’ used in reference to a transaction is the day the transaction is effected on the trading flo or.
‘trading board’ means the boards on the trading floor on which bids, offers and sales on listed securities are recorded during trading sessions.
‘trading floor’ is the physical place within which transactions in securities are carried out at the Exchange.
‘transaction across books’ is a transaction where a member represents both the buyer and the seller in the same transaction.
‘trading zone’ is the area, on the trading floor between the rails next to the boards and the first row of counters.
‘underselling’ is a situation where a floor trader halts a transaction that is about to be concluded by offering to sell at a price which is a spread lower than the price about to be dealt at for at least 50% of the lot on offer, the balance being sufficient to rem ain as a lot on the board.
‘verification (validation)’ is the process whereby registrars carry out due diligence and ascertain that the:
(a) transfer deed is duly completed (full name of the security, number of shares in both words and figures, name and addre ss of the transferor, signature and identity card or passport number of transferor and the witness to the signature);
(b) transferor as identified on the transfer deed (full names and address) is on the register;
(c) signature of the transferor on the transfer deed and the identification number quoted correspond to those on the register;
(d) shares in the transferor’s account are sufficient;
(e) documents provided as evidence of ownership are valid and the same do not have a caution or caveat placed on them;
(f) validity of the documents provided as evidence of title by stamp and signature on the reverse of the documents and where the said requirements are not met, the registrar shall decline to verify the shares;
‘working day’ excludes Saturday, Sunday and public holidays. Unless expressly stated otherwise, all references to days shall be deemed to be references to working days.
MANAGEMENT & MEMBERSHIP PART I
MANAGEMENT
1. The Board
1.1 The policy and general direction of the Exchange shall be determined by the Board.
1.2 Members of the Board shall be elected and appointed in accordance with the Act, and the Articles of Association of the Exchange.
1.3 The Board shall exercise such powers as may be exercised in accordance with the Exchange’s Articles, the Act, or other written law required to be exercised by the Exchange.
1.4 The persons to be elected to the Board shall meet the qualifications and expertise requirements prescribed under the Act.
1.5 The board members shall be appointed for a term of office pr escribed under the Act.
1.6 Without prejudice to the generality rule 1.1 to 1.3, the Board shall exercise the following powers in accordance with the procedure prescribed by these rules:
(a) appoint any person to be a Chief Executive of the Exchange; (b) appoint any member of a committee formed for general or specific
tasks for such duration as the board may specify as provided in these rules;
(c) determine remuneration of the Chief Executive and senior staff of the Exchange;
(d) review or vary any policy decisions;
(e) delegate any of its powers to the Chief Executive or to a committee and provide guidance and or ratify decisions on the basis of the delegated powers;
(f) interpret these rules and the validity of any act made pursuant to these rules in the event of any dispute or difference over interpretation;
(g) reprimand, fine, suspend or expel any Member, its representatives and executive director and to exercise such other disciplinary measures as provided in these rules with prior consultation and approval of the Authority;
(h) enforce or implement the Articles and the rules and to suspend trading activities on the Exchange in the event of an emergency
with prior consultation with the Authority as provided in these rules;
(i) grant admission to licensed full or associate members or suspend the trading floor rights of any full or associate member or its representative as provided in these rules, with prior consultation with the Authority.
(j) exercise such other powers as are necessary to enforce the requirements of the Act, Articles and the rules.
2. Committees
2.1 The Board may appoint standing committees & ad hoc committees comprising members and other persons with relevant expertise for a specified mandate or task and term.
2.2 All committees appointed by the Board shall, in the exer cise of the powers so delegated, conform to the requirements of the assigned mandate subject to the requirements of these rules and the Act.
2.3 Each committee shall, be subject to the right and power of the Board to review, vary, ratify or supplement its decisions. The committees shall make recommendations to the Board and the Board shall have the discretion to make and to carry out the decisions on such recommendations.
2.4 All members of a committee shall serve for a period of one year from the date of appointment and may be re -appointed by the Board. The Board may also fill any casual vacancies that may occur in any committee by reason of resignation, retirement or otherwise and such new appointee shall serve for the remainder of the term of office o f the committee.
2.5 A member of a committee shall cease to be a member in the following circumstances:
(a) if a bankruptcy order is made against a member or if a member makes any arrangement or composition with his creditors;
(b) if he becomes incapacitated by mental or physical illness or is otherwise unable or unfit to discharge the functions of a member or is unable to continue to act as a member;
(c) if by notice in writing the Board removes him; (d) if by notice in writing to the Board, he resigns;
(e) if the member has carried out gross misconduct or has been in breach of the code of conduct for members of the committee; or (f) if the member has been charged for committing or has committed
a serious civil or criminal offence during the member’s term of office in the commi ttee.
2.6 The following shall be the standing committees and their mandates; (1) Listing, Membership and Disciplinary Committee Mandate
(i) Subject to the Listing Manual, to review and approve application for admission to listing of new and additional secu rities in any of the market segments;
(ii) To review the procedure for admission of securities to listing and make recommendations for amendment to the listing rules pursuant to the procedures provided under these rules and the Listing Manual;
(iii) To review compliance with continuing listing obligations by listed companies and make recommendations to the Board on the necessary action for non compliance including imposing penalties and other sanctions as provided under the Listing Manual;
(iv) To recommend suspension of listing of securities for a predetermined period as may be necessary and to restore such securities to listing in line with the procedures provided in the Listing Manual;
(v) To identify impediments to listing of securities at the Exchange and make recommendations of ways and measures to address such impediments;
(vi) To make proposals on any incentives necessary to promote and attract listing of securities;
(vii) To review the listing fees on an annual basis and make recommendations on necessary revisions with a view to encouraging listings;
(viii) With regards to the membership rules, to review the application and make recommendations for admission of new members; (ix) To recommend the minimum membership requirements pursuant
to these rules;
(x) To review the membership rules and make recommendations on revisions of the same pursuant to the Act and these rules;
(xi) To recommend circumstances under which a member can be disciplined or suspended;
(xii) To censure or fine a member with prior notification to the Authority.
(2) Audit, Finance and Administration Mandate
(i) To review the adequacy of Internal Audit Programmes for the year;
(ii) To monitor, review and make recommendations on the adequacy of the exchange’s internal control and risk management systems through:
(a) evaluating whether senior management is setting the appropriate tone by communicating the importance of internal control and the management of internal risk; (b) monitoring how management is held to account for
computer systems and applications, the security of those items and contingency plans; and
(c) monitoring whether internal control recommendations made by internal and external auditors have been implemented by management.
(iii) To review the year-end financial statements, significant accounting and reporting issues and the audit findings, including any significant suggestions for improvements provided to management through:
(a) professional and regulatory pronouncements; and (b) results of the internal audit.
(iv) To review the process used by management to prepare interim financial information by:
(a) monitoring how management develops and summarizes interim and preliminary results information, and the extent of internal and external audit involvement in the review of such information; and
(b) ensuring that the International Accounting principles have been consistently applied, and that the preliminary announcements and interim financial statements contain adequate and appropriate disclosures.
(v) To monitor, review and make recommendations to management on the process for monitoring compliance with relevant laws and, with the listed company’s legal counsel if appropriate, any legal matters that could have a significant impact on the company’s financial statements through:
(a) reviewing systems for monitoring compliance with la ws and results of management’s investigations and follow -up of any fraudulent acts or accounting irregularities;
(b) obtaining regular updates from management regarding compliance;
(c) assessing whether all regulatory compliance matters have been considered in the preparation of financial statements; and
(d) reviewing the findings of any investigations by regulatory agencies.
(vi) To monitor, review and make recommendations on the process for monitoring compliance with any internal code of conduct, through:
(a) evaluating whether there is an appropriate “tone at the top” and whether the board emphasizes the importance of the code;
(b) reviewing the programme for monitoring compliance with the code of conduct; and
(c) periodically obtaining updates from management regarding compliance.
(vii) To review the efficiency and effectiveness of operations including non-financial controls of the Exchange and make recommendations on the same;
(viii) To review the procedure for submission to the Board of the operational and capital budgets and any supplementary changes thereto;
(ix) To ensure a system of adequate controls in the receipt and payment of cash;
(x) To evaluate the listed company’s policy on insurance of assets; (xi) To evaluate the system of procurement of goods and services; (xii) To review existing administrative procedures, systems and
processes and recommend improvements thereon; (xiii) To evaluate the efficacy of the Personnel Manual.
(3) Market Development, Education and Publicity Mandate
(i) To liase and lobby with government authorities on the identification of suitable candidates for privatisation through the Exchange;
(ii) To liase and encourage, through personal contacts, private sector companies which are not quoted on the Exchange on the possibility of listing;
(iii) To identify sectors that are under-represented on the Exchange and to encourage their entry into the market;
(iv) To encourage listed companies to raise additional capital through the Exchange by issuing new shares for public subscription;
(v) To encourage the local well cap italized companies to expand their bases with a view of trading and operating across borders; (vi) To create in liaison, with the Authority and Government Authorities, a conducive environment for listing of companies both local and foreign, on the Exchange;
(vii) To consider from time to time, factors inhibiting or affecting new listings;
(viii) To consider and recommend, introduction of new instruments in the market, to the board for deliberation and ratification before being presented to the Authority for approval;
(ix) To consider the possibility of a formal over the counter market and make recommendation to Board for deliberation and ratification before being presented to the Authority for approval;
(x) To consider the creation of a Venture Capital Board and make recommendations to the Board for deliberation and ratification before presenting to the Authority for approval;
(xi) To consider factors that inhibit market liquidity and make recommendations on how this could be resolved;
(xii) To identify and make recomm endations on market capacity building necessary for market development;
(xiii) To facilitate new and varied products and increase market share to the benefit of investors, the whole industry and the economy in general;
(xiv) To review and recommend expansion of all facets of the Exchange’s business for the benefit of members, the whole industry and the economy generally;
(xv) To educate all the public about the Exchange and it’s operations with the aim of increasing investors and expanding the investor base for the benefit of members, the whole industry and economy generally.
(4) Trading and Compliance Mandate
(i) To recommend additions and alterations to the trading, delivery and settlement procedures and rules of the Exchange to the Board for deliberation and ratification before being presented to the Authority for approval;
(ii) Oversee the implementation of the rules to ensure that fair, transparent and efficient trading practices are in place;
(iii) Receive and review proposed amendments from members from time to time and make any recommendations thereof;
(iv) Offer interpretation to rules and to simplify the same where necessary;
(v) To arbitrate any trading, delivery and settlement disputes; (vi) To consider review and recommend any amendments to the
existing code of conduct for all trading floor personnel; and (vii) To refer any disciplinary cases to the disciplinary committee for
further action.
2.7 The Board may establish an ad hoc committee with a specific short mandate of no more than four months.
2.8 The number of members in a commi ttee shall be a minimum of 3 and a maximum of 7, except for a committee of full Board.
3. Proceedings of Committees
3.1 Committees shall meet for the conduct of business, adjourn and otherwise manage their meetings in such manner as it is necessary to fulfil their mandate.
3.2 Every committee shall have a convenor who shall be appointed by the Board and shall be its chairman and preside over all meetings. If at any meeting the convenor is not present within fifteen minutes after the time appointed for holding the meeting, the members of the committee then present may nominate one of their number to act as chairman of the meeting.
3.3 A formal notice of at least five (5) working days shall be given for any committee meeting and shall be exclusive of the day for which the notice is served and the day on which it is given, and shall specify the place, the day, the hour and the agenda of the meeting. A notice of not less than 3 hours shall be given for any urgent committee meeting whenever
unforeseen circumstances necessitate the holding of such meeting. The Committee may however convene such urgent meeting subject to satisfying the quorum requirements.
3.4 A member of a committee shall give to the convenor of the committee an address including physical location and telephone contact at which notices may be served on him. Upon the despatch of any notice properly carrying the address supplied by the member, such notice shall be deemed to have been validly served on that member. The mode of communication shall include e-mail, letter delivered to the physical address or such other effective way of communication including faxes. Notice shall be deemed to have been served the following day.
3.5 At least three members of a committee shall constitute the quorum necessary for the transaction of business. The Chairman of the Exchange and Chief Executive shall be entitled to attend meetings but shall not count for the quorum nor be allowed to vote except for the Listing, Membership & Disciplinary Committee.
3.6 No business shall be transacted at any meeting unless a quorum is present. A meeting of the members of a committee at which a quorum is present shall be competent to exercise the mandate and discretion vested in the committee.
3.7 Every member of a committee shall have one vote and questions arising at any meeting shall be determined by a majority of votes. In case of any equality of votes, the chairman shall have a second or casting vote. 3.8 All acts done bona fide by any member of a com mittee pursuant to the
resolutions made in any meeting of the committee shall, as regards all persons dealing in good faith with the Exchange, notwithstanding that it be subsequently discovered that there was some defect in the appointment of any such memb er or that such member was for some reason ineligible for appointment, be deemed to be valid as if every such member had been duly appointed and was qualified to be a member of the committee other than in a situation where the participation of such member violates any legal or regulatory requirement.
3.9 A committee shall cause proper minutes of its meetings and all business dealt with at the meetings to be kept in the English language. The minutes of any meeting shall, if signed by the chairman of such meeting or by the chairman of the succeeding meeting, be evidence of the facts and decisions stated therein. The Chief Executive shall appoint a senior staff member to act as the secretary to the Committee.
3.10 A resolution in writing signed by all the members of a committee shall be as valid and effective as if the resolution had been made at a meeting duly convened and constituted.
4. The Chief Executive
4.1 The Chief Executive shall be appointed by the Board for a predetermined fixed term not exceeding four years and be eligible for reappointment for a further term determined by the Board not exceeding four years and meet the qualifications and experience prescribed as follows:
(i) at least ten years’ experience at a senior management level in matters relating to law, finance, accounting, economics, banking or insurance; and
(ii) expertise in matters relating to money or capital markets or finance.
4.2 The Chief Executive shall be responsible for the day to day management of the operations of the Exchange under the general direction and control of the Board. The functions of the Chief Executive shall include the following:
(i) To enforce the provisions of the Act and the rules of the Exchange and immediately report any violations to the board and the Authority;
(ii) To ensure compliance with the requirements of the Act, and rules in operations, transactions and all affairs of the Exchange including listings and continuous reporting obligations of listed companies;
(iii) To supervise the trading activities of the Exchange and to take all necessary steps to maintain orderly and efficient trading and functioning
of facilities, in accordance with the rules and as prescribed by the Act;
(iv) To report periodically to the Board on all matters concerning the operation and affairs of the Exchange; (v) To ensure proper management of the Trading Floor facility
including security and custody of all records as prescribed in the Act and the
rules;
(vi) To attend all meetings of the committees and pr ovide technical input where necessary;
(vii) Promote the objectives and functions of the Exchange and liaison with the Authority and its representatives in respect of administrative and technical matters of the Exchange; and
(viii) Any other functions as may be assigned or delegated by the Board.
4.3 The Company Secretary of the Exchange (or any other person that may be designated from time to time by the Board) shall be the secretary to the Board. Such a person shall be a qualified member of th e Institute of Certified Public Secretaries of Kenya. The appointment and removal of the Company Secretary shall be by the Board.
4.4 The Company Secretary shall keep a register of members, representatives, executive directors, principal officers and any other registers as may be determined by the Board.
4.5 The Register of members shall disclose the executive directors and principal officers of each member and their representatives the name, address, membership number, the name of guarantor, and such other information required by the Board from time to time.
4.6 The Register of representatives shall include the registration number of representative of members, names and addresses of the representative's principal and branch offices, names and addresses of executive directors, name of the guarantor and such other information required by the Board from time to time.
4.7 The Register of executive directors and principal officers shall include their names and addresses and the Members they represent, their qualifications, and such
other information required by the Board from time to time.
4.8 The Registers shall be open for inspection at any time during office hours by any Member or legally authorised person.
5. Board and Committee Members Allowances
5.1 Remuneration for the Board and its committees shall be determined by the Board with the approval of the Authority.
5.2 The remuneration shall be in the form of sitting allowances for participation in the meetings of the Board or committee as the case may be, to carry out their mandate.
5.3 Every Board member shall be eligible for a sitting allowance prescribed under Part 2 of Appendix A, regardless of the duration of the meeting. The sitting allowances may be revised on the recommendation of the Board and with approval of the Authority.
6. Employees
6.1 The Board may appoint and dismiss employees of the Exchange subject to the provisions of these rules, and in accordance with the Exchange’s Personnel Manual. The employee so appointed shall perform s uch duties as are prescribed by the terms of their appointment or delegated by the Chief Executive from time to time.
6.2 The job specifications, job descriptions including appointment policies and terms of service of the employees shall be approved by the Board and defined in the Personnel Manual.
MANAGEMENT & MEMBERSHIP PART II
MEMBERSHIP
1. Qualifications for Membership 1.1 Qualification for full Membership
A body corporate, which is a holder of a stockbroker, dealer or investment bank licence from the Authority and any other financial institution approved by the Authority shall be admitted to full membership of the Exchange on payment of the admission fee approved by the Authority.
1.2 Qualification for Associate Membership.
A body corporate, which is a holder of an authorised securities dealer licence from the Authority and any other financial institution approved by the Authority shall be admitted to associate membership of the Exchange on payment of admission fee approved by the Authority.
2. Application Procedure
2.1 An applicant for membership shall deliver to the Chief Executive a letter from the Authority accompanied by a certified copy of the licence.
2.2 Upon certification by the Board of the validity of documents submitted by the licence holder, the licence holder shall pay the application fee as provided under these rules.
2.3 The applicant shall pay the admission fees within thirty (30) days from the date of approval of admission fees by the Authority.
2.4 As from the date of payment of the admission fees, the licence holder shall be registered as a Member and entitled to all the benefits accorded to members. Should the payment not be made within the thirty (30) day period, the application shall automatically lapse, unless the Board or th e Authority extends such period. The schedule of membership fees is provided under Appendix A of these rules.
3. Bank Guarantee
3.1 Every member shall furnish the Exchange, or the Central Depositories Settlement Corporation as applicable, with a bank gua rantee or deposit for the amount prescribed under the Act.
3.2 A member that fails to restore its bank guarantee in accordance with rules and as prescribed under the Act shall not be entitled to trade until the guarantee has been restored.
4. Independence
No member shall directly or indirectly hold beneficial interest in the shares of any other member other than as prescribed under the Act. 5. Suspension and Expulsion
5.1 A full member or associate member may be suspended by the Board: (i) with prior consultation and approval of the Authority; or
(ii) as directed by the Authority for non compliance or violation of the rules or the Act.
5.2 All rights and benefits of a full or associate member as the case may be shall cease upon suspension of that member.
5.3 No member may however be suspended unless the suspension is approved by the Authority
5.4 The expulsion of a member shall only be upon revocation or non-renewal of a licence by the Authority.
6. Liability of directors and officers
Any director, manager, or officer of a member shall together with such member be liable for any breach, non -compliance, violation or contravention of the Act, the Articles or the rules if such breach, non-compliance, violation or contravention was committed or caused with the consent or connivance of or attributable to any neglect on the part of such director, manager, or officer.
7. Floor Traders and Authorised Representatives
7.1 Members shall ensure that the floor traders and representatives are registered with the Exchange. The member shall ensure that any applicants for registration are fit and proper persons for the responsibility of dealing in securities.
7.2 A member shall be liable for all transactions made on its behalf by any floor trader or representative it employs and shall fulfil such transactions according to these rules.
7.3 Every person wishing to be registered as a floor trader or a representative, shall undertake to abide by the rules and the decisions of the Board.
7.4 Every applicant for registration as a floor trader or representative shall be recommended by the member who will be liable for all transactions made on its behalf by such person.
7.5 Every floor trader or representative shall have successfully completed an examination prescribed under the Act.
7.6 The Exchange shall have full power to investigate the conduct and integrity of any person to be appointed as a floor trader or representative and absolute discretion to withhold or to withdraw approval at any time without assigning any reason for its action.
7.7 An Authorised Person Card will be issued to each registered floor trader and representative and must be produced in order to access the trading floor.
7.8 An Authorised Person Card shall not be transferable. If lost, the member concerned shall notify the Exchange in writing and apply for a duplicate card at a cost determined by the Exchange.
7.9 If there is any change of employment of the floor traders or representatives, the member by whom any departing registered person is or was employed shall immediate ly inform the Exchange and be responsible for the return of that Authorised Person Card to the Exchange for cancellation.
8. Transfer of Membership
8.1 Any member who wishes to transfer its membership shall give written notice of such intention to the Exchange and to the Authority and the full name, address and description of the proposed transferee.
8.2 The proposed transferee shall apply to the Exchange to become a member in place of the transferor and the procedure and requirements for admission to membership other than payment of admission and application fees shall apply.
8.3 No transfer of membership shall be approved unless the ‘transferor’ member has settled all obligations arising from trading and the Authority has licensed the transferee.
8.4 The duly executed agreement to transfer shall be lodged with the Exchange and, once approved by the Board, the transferor's name shall be deleted from the register of members and the transferee’s name entered in its stead.
9. Company Name and Address
9.1 Every member shall register with the Exchange the name under which it carries on the business of dealing in securities as a member. The
company name of a member registered with the Exchange shall be the same as that registered by such member under the Companies Act. 9.2 A member may register with the Exchange no more than one principal
business address held for the purpose of dealing in securities. A member may however register branch offices.
9.3 A member shall give advance notice of commencement, temporary suspension, cessation and re-commencement of business to the Exchange.
APPENDIX A
PART 1: MEMBERSHIP FEES
FULL MEMBER ASSOCIATE MEMBER
Kshs. Kshs. Application Fees 100,000 50,000 Annual Subscription fee 50,000 100,000 Admission fees 2,500,000 250,000
PART 2 : SITTING ALLOWANCES FOR MEMBERS OF THE BOARD Board Member Kshs 20,000 per day
