Consumer protection laws and policies aim to safeguard consumers from unfair trade and credit practices. In Kenya, these regulations are established by the Constitution and the Consumer Protection Act & Regulations. They primarily target prohibiting false and misleading representation, unconscionable conduct and liability in respect of unsuitable and defective products.

Private placement refers to sale of securities to pre-selected investors rather than publicly in the open market. The relevant laws governing this practice are the Capital Markets Act and the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2023.

The capital market plays a crucial role in a nation’s financial system, facilitating economic democratization. Over the past decade, global capital markets have experienced significant changes driven by technological advancements and favorable economic conditions. This period has seen a surge in retail investor participation, driven by asset value growth and increased accessibility to wealth-building opportunities through improved technology and innovative financial products.

However, despite these advancements, critical gaps remain in investor protection, information reliability, personalization, and financial literacy. The consequences of these gaps can be severe, particularly for retail investors. The 2008 global financial crisis stands as a stark example, where collateralized debt obligations backed by risky subprime mortgages lead to widespread losses and economic upheaval once the precariously structured securities ultimately collapsed.

Locally, incidents like the default of Cytonn High Yield Solutions LLP (CHYS) and Cytonn Real Estate Project Notes LLP (CPN) underscore the risks faced by investors. Following the default of CHYS and CPN, the Capital Markets Authority (CMA) faced scrutiny regarding its regulatory oversight. The CMA explained to Parliament that it encountered challenges in regulating CHYS and CPN because they were classified as private placements, despite being offered to the general public instead of a select group of investors not exceeding 100 individuals, as required by existing regulations.

Among the recent legislative developments in Kenya’s capital markets landscape are the Capital Markets Act and the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2023. Enforced since December 15, 2023, these regulations supersede the 2002 Regulations and bring about significant changes. Notably, they refine the definitions of a “public offer” and a “private offer,” addressing concerns raised about the interpretation of previous definitions and their implications for securities offerings. While some criteria from the repealed regulations remain unchanged, there are notable alterations.

One key change is that individuals beyond the 100-person limit must now be specifically identified. Additionally, offers are now restricted to a continuous period not exceeding twelve months, and the same entities or related parties cannot repeat the offer, wholly or partially, to different persons for a common purpose within twenty-four months of the initial offer.

Another significant legislative addition is the Capital Markets (Alternative Investment Funds) Regulations, 2023 (AIF Regulations), which came into effect concurrently with the Capital Markets (Collective Investment Schemes) Regulations, 2023. The AIF Regulations aim to subject private equity, venture capital, hedge funds, and similar entities to the regulatory oversight of the CMA.

Under these regulations, AIFs must obtain licensing from the CMA to pool funds from private investors. The licensing process involves submitting an application with a fee of Kshs. 10,000 (USD 68) and an annual licensing fee of Kshs. 250,000 (USD 1,728). Until licensed, an entity cannot operate as an AIF but may collect funds through private placement, provided the pooled funds remain uninvested until the CMA issues the license.

The CMA’s regulatory authority over AIFs encompasses various aspects, such as requesting information about fund management activities, approving investment policies and amendments thereto, and ensuring the fitness and propriety of directors and partners in accordance with the Capital Markets Act.

Moreover, the AIF Regulations impose investment criteria on AIFs, including limiting participants to fewer than 100, setting a minimum initial investment threshold of Kshs. 1 million and mandating prior approval from the CMA for any private placement memorandum related to fundraising activities.

Additionally, AIFs must appoint a custodian licensed by the CMA to safeguard the assets under management, further enhancing investor protection and regulatory oversight within the alternative investment landscape.

In addition to the aforementioned regulations, the CMA has implemented various measures to protect retail investors. It conducts financial literacy programs in counties and universities nationwide.

Regarding intermediaries, the CMA licenses institutions engaging in dealer, investment bank, fund manager, investment adviser, and authorized depository activities, ensuring compliance and protecting investors from unregulated entities.

As part of its consumer protection mandate, the CMA addresses investor complaints against market intermediaries through an anonymous reporting portal and walk-in policy. Unresolved issues are handled by the Frauds Investigations Unit.

Further safeguarding investors, the Investor Compensation Fund provides compensation for pecuniary losses resulting from licensed dealers’ failure to fulfill contractual obligations.


The evolving landscape of private markets calls for a re-evaluation and strengthening of consumer protection policies on a local and global scale. These policies must adapt to the increased accessibility and globalization of investing while maintaining trust among retail investors.

Retail investors stand to benefit greatly from the expanding opportunities in capital markets, particularly in private placements offering potentially higher returns. However, addressing gaps in access, education, and trust is essential to ensure the sustained participation of retail investors.

A robust financial consumer protection framework should prioritize three key objectives. Firstly, consumers should have access to accurate, clear, and comparable information about financial products and services both before and after purchase. Secondly, efficient and cost-effective dispute resolution mechanisms with financial institutions should be readily available to consumers. Thirdly, consumers should have access to financial education tailored to their needs and preferences.

For more on this topic, please reach out to Nelson Otiende at 


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