This Code is intended to guide investment service providers at the securities market, collectively being members of the Kenya Association of Stockbrokers and Investment Banks, in ensuring professionalism, high ethical standards and fair play while carrying out their professional activities. The paramount objective of the Code is to promote and uphold good business conduct, ethics, professionalism and discipline amongst members of KASIB at all times in order to ensure provision of quality professional investment services in Kenya .
The Code shall be binding on all Members of KASIB and shall be enforceable by or against any member of KASIB.
The Code is not intended to replace, amend or vary any of the provisions of the laws currently in force relating to capital markets business in Kenya .
In this Code unless the context provides or requires otherwise;
Member¯ means a person who has been admitted to membership of the Kenya Association of Stockbrokers and Investment Banks;
KASIB¯ means Kenya Association of Stockbrokers and Investment Banks;
NSE means Nairobi Stock Exchange
The Automated Trading System (ATS)¯ has the meaning attributed to it under the relevant rules of the KASIB;
The Code means this Code of Conduct as amended from time to time;
Reference to the relevant authorities, the regulator or the licensing authority shall be deemed to include both the Capital Markets Authority and the NSE;
Reference to any statutory provision or any law shall be deemed to be reference to that law as amended from time to time and to all rules, regulations and directives issued thereunder and shall include rules made by KASIB;
Words importing masculine gender only include the feminine and all other genders and vice versa;
Words importing singular number only include the plural number and vice versa.
Knowledge of the law
Every member shall: -
understand and comply with all applicable laws, rules, regulations and directives given by the government, regulatory authorities, licensing agencies and the KASIB;
not engage in conducts that constitute a violation of the laws relating to securities market in Kenya ;
if it has reasonable grounds to believe that imminent or ongoing activities are illegal or unethical, dissociate from the activities immediately and report any suspicious activities or transactions to the relevant authorities, and to KASIB;
in the case of apparent conflict or ambiguity in the applicable laws, immediately notify the relevant authority and KASIB of the conflict or ambiguity.
Independence and objectivity
While acting in the course of their profession, members shall not allow their judgments to be influenced by external factors or persons not related to the transactions involved, and every member shall: -
use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities;
use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, taking investment actions, and engaging in other professional activities;
not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another person's independence and objectivity;
not deal in securities in a manner which contravenes rules of trading of NSE, relevant laws or in any manner prejudicial to the interest of their clients, investors and members of KASIB.
Every member shall: -
not knowingly or negligently give false statements relating to investment analysis, recommendations, actions and other professional activities;
have reasonable and adequate basis for any investment analysis, recommendation or action;
disclose to clients the basic format and general principles of the investment processes used to analyze investments, select securities and construct portfolios and shall promptly disclose any changes that might materially affect those processes;
act in good faith in all their dealings and/or communications with the clients, other professionals in the capital markets, the relevant authority, the NSE, KASIB and the public at large.
Material non-public information
Every member who possesses material information not available to the public and with the potential to affect the value of an investment shall: -
take all reasonable measures necessary in the circumstances to ensure that the information is kept confidential;
not act or cause others to act on the information;
immediately, if necessary, take the relevant steps necessary to publish the information in accordance with the law.
No member shall: -
engage in practices that distort prices or artificially inflate trading volume with the intent to mislead market participants, investors and members of the public;
be a party to any trading and price manipulative practice which may directly or indirectly influence or interfere with the market price formation and fair trading process with respect to any listed security;
interfere with the Automated Trading System (ATS) so as to alter the prices of any securities;
introduce to the ATS any device which has the effect of distorting or electronically tampering with the price of a security.
Prudence and Diligence
Every member has a duty of loyalty to its clients, and in accordance with the said duty every member shall:
act with reasonable care and exercise prudent judgment when dealing with its clients;
act for the benefit of its clients;
put the interests of clients above its own interests.
Every member shall deal fairly and objectively with all clients when providing investment analysis, making investment recommendations, taking investment action or engaging in other professional activities.
No member shall recommend to a client to whom investment, supervisory, management or consulting services are provided, the purchase or sale of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client and upon reasonable enquiry concerning the client's investment objectives, financial situation and needs, and upon reasonable examination of the client's financial records.
Consent of the client
No member shall carry out any transaction in relation to clients securities account unless he has obtained written instructions from the client authorizing the transaction, and in particular no member shall: -
lend or arrange for the lending of any securities carried for the account of any client without the client's written consent;
borrow, or arrange to borrow using the securities carried for the account of any client, as collateral, without the client's written consent;
sell or in any manner whatsoever part with securities carried in a client's securities account without the client's prior written authorization.
Competing compensation arrangements
No member shall accept gifts, benefits, compensation or consideration that competes, or might reasonably create conflict of interest, with their client's interest unless he has obtained prior written consent of the client.
Every member shall maintain good communication with its client and shall ensure that every communication with the client is: -
made by its authorized representative, agent or employee;
fair, accurate and complete;
evidenced in writing.
Every member shall keep confidential all information it has acquired about current, former, and prospective clients. Information may be disclosed only if: -
the information concerns illegal activities on the part of the client or prospective client;
disclosure is required under the law;
the client or prospective client permits disclosure of the information;
the information is required by KASIB for the purposes of carrying out its objectives.
Diligence and reasonableness
In all the dealings with clients every member shall: -
exercise diligence, independence and thoroughness in analyzing investments, making investment recommendations and taking investment actions;
have reasonable and adequate basis for any investment analysis, recommendation or action.
Conditions precedent to delivering advice
Every member shall, prior to effecting any transaction or giving any investment advice, disclose to the client the basic format and general principles of the investment processes used to analyze investments, select securities and construct portfolios and shall promptly disclose any changes that might materially affect those processes.
Every member shall make and maintain, in a format acceptable to KASIB, appropriate and accurate records of investment analysis, recommendations, actions and other investment-related communications with clients and prospective clients.
Disclosure of interest
Every member shall: -
make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or otherwise interfere with their duties to the client;
ensure that every such disclosure as in (a) above are prominent, delivered in plain language, and communicated effectively.
Priority of transactions
Every member shall give priority to investments transaction for clients over those ones in which the member is the beneficial owner or has beneficial interest.
Every member shall disclose to its client any compensation, consideration or benefit received from or paid to others for their recommendation of product or services.
Conduct as members of KASIB
No member shall: -
engage in any conduct that compromises or in any way violates the reputation or integrity of KASIB or the services offered by KASIB;
deal in securities which are not listed on the NSE;
deal with securities otherwise than as permitted by the law and the rules of the NSE.
Reference to KASIB
No member shall, when making reference to KASIB, misrepresent or exaggerate the meaning or implications of membership of KASIB.
No member shall: -
enter into any agreement, whether formal or informal, with another member whether directly or through another person, whose terms relate to any capital markets' business which is likely to undermine competition and fairness in trade practices and services to investors;
hold beneficial interest in another member, except as may be allowed under the law.
Segregation of clients assets
Every member shall segregate its assets and funds from those of the client, and in particular shall: -
maintain distinct and separate accounts for its assets and those of the client;
maintain an accurate register of securities in which it has interest, and any change therein shall be noted in the register as soon as practicable but not later than seven days from the date of the change;
ensure that clients' accounts and assets are not dealt with in any manner which violates the law and/or the rules of KASIB.
Good corporate management practices
Every member shall adopt good corporate management practices accepted and recommended by KASIB and the Regulator.
Internal compliance mechanisms
Every member shall establish legal, financial and other risks' compliance procedures recommended and accepted by KASIB and the Regulator.
Money launderingEvery member shall: -
Any member may submit a complaint of violation of this Code by another member to the relevant committee of KASIB which shall take necessary steps to ensure that the member in violation remedies any such breach.
In case the committee cannot resolve the issue, it shall be referred to the board of KASIB which shall ensure that it is settled amicably.
If the issue cannot still be resolved, the aggrieved member shall be entitled to the recourses available under the Capital Markets Act and any other relevant laws, rules and regulations.
If any dispute arises between two or more members concerning any issue, the members shall take all reasonable steps and co-operate to ensure that the dispute is settled by way of negotiation. If the dispute cannot be determined by negotiation, it shall be resolved in accordance with the dispute resolution mechanisms provided for under the KASIB rules, the Capital Markets Act and other relevant laws.
This Code may be amended from time to time as may be agreed by the Members.
No amendment to the Code may come into force unless and until it has been approved by KASIB and the Regulator.
Code of Ethics
This is when the market price of a share is greater than its original purchase price giving rise to a profit which is not a realized profit until the shares are actually sold..
This is a condition in which the returns on an investment are greater than the cost of financing it. Example; if you were to borrow KES 100,000 at an interest rate of 10% and invest the same in a bond paying 12%, then there is a positive carry..
This is when there are not enough applications for the purchase of a new issue of shares. There are various possible reasons for undersubscription including doubtful prospects of the company, wrong timing for the issue and wrong pricing of the issue.
It is also known as Underbooking..
The date on which the principal amount on a debt e.g. bond, is due and is repaid to the investor. The maturity date depends on the terms of the debt..
A prospectus is a formal document offering to sell shares to the public that gives all relevant details of the company (or mutual fund) that an investor needs to know to make an investment decision..