CMA seeks consultant to review fees, levies

By James Anyanzwa

The Capital Markets Authority (CMA) is looking for a consultant to carry out a comprehensive review of fees, commissions, and levies paid by investors and issuers, which have partly been blamed for the industry’s lacklustre performance.

The authority has issued out an expression of interest, seeking to engage an independent consultant to review the various fees, levies and commissions charged in the market. This will include but not limited to regulatory fees, Nairobi Securities Exchange (NSE) fees, Central Depository and Settlement Corporation (CDSC) fees, and transaction levies.

Others include  investment management fees, advisory fees, issue costs, brokerage fees and commissions. The findings and recommendations of the study will inform policy review of the current fee structure.

The move is part of CMA’s efforts to deepen the capital markets, whose role in resource mobilisation is critical in the achievement of the country’s long term development blue-print Vision 2030.

The consultant is expected to undertake the study with reference to the various fees, commissions and levies charged in the market. This will assist in determing their adequacy, the impact of various fees to overall transaction costs and the relevance and basis for charging/determining the fees and justification for each specific fee.

The consultant would also be required to consider the relevance of various fees in determining the choice of investment or fund raising option, consider other ways of generating fees and revenues for CMA, NSE, CDSC and market intermediaries and consider level of competitiveness of the current market fees relative to other jurisdictions comparable to Kenya. He or she would then be required to recommend optimal fees structure for the Capital Markets.

“The CMA now invites interested candidates to express their interest to provide the services. Interested persons must demonstrate ability and capacity to undertake the assignment,” said CMA.

Each transaction on the securities exchange attracts a commission of 2.1 per cent for any transactions worth below Sh100,000 and 1.8 per cent for any transactions above Sh100,000.

Listed companies

CDSC’s main source of revenue is a transaction levy charged on each transaction settled through the CDSC and a depository levy charged to listed companies on the basis of the number of transactions per year but subject to a cap. 

The CDSC is paid a transaction levy of 0.06 per cent and 0.002 per cent of the value of equity and debt transactions in the secondary market respectively. CDSC also collects levies from pledges, releases and foreclosures. CDSC proposes that the transaction levy rate be increased from 0.06 per cent to 0.12 per cent of transaction value.

Rising operational costs, falling revenues, stiff competition for limited consultancy contracts and fluctuating trade volumes at the NSE are swiftly pushing stockbrokers, investment bankers and fund managers into financial distress.

“ Basically our concerns have to do with the level of commissions. Over the last one year or so the performance of the NSE has not been impressive with volumes going down,” said John Kirimi, Executive Director at Sterling Capital Ltd. “ As we go forward we have to prepare for the worst because our business is perception-based.”