Advisor to aid SMEs list on bourse

August 24, 2011
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, NAIROBI, Kenya, Aug 24 – In an effort to ensure that Small and Medium-sized Enterprises (SMEs) that list on the Nairobi Stock Exchange meet their obligations as listed companies, a new regulatory framework is proposing the position of an advisor to assist firms comply with all the set requirements.

The technical committee that has developed the new draft regulations for the establishment of an SME segment at the bourse recommends a new market intermediary to be known as a Nominated Advisor (Nomad) to guide the new entrants in the listing process.

“The Nomad acts as a coordinator between the issuer, the NSE and the Authority at all times. It assists the company in terms of processing its applications and informs the Authority and the Exchange in case its client is non-compliant,” explained the committee chairman Donald Ouma.

The advisor will also be mandated to ensure that the client has proper internal systems and processes to meet required obligations.

Given this huge responsibility, the advisor will have to be competent and highly experienced.

For instance, a firm wishing to offer its services as a Nomad will need to be one that is incorporated under the Companies Act or a licensee of the CMA.

It will also need to have done three ‘relevant’ transactions two years prior to making the application as well as have two authorised representatives who will be assigned to each client wishing to list.

These requirements form part of the criteria that an applicant will have to meet and is premised on the fact that disclosures are crucial in ensuring a stringent and a well-regulated industry.

Although the entry conditions will not be as strict as those of the Main Investment Market Segment and Alternative Investment Market Segment, the listed SMEs will still have to adhere to the same stringent disclosure standards.

“There is no distinction between retail and institutional investors and this underlies how important disclosures are to this market.  So in terms of disclosures, the focus is on assisting the company to meet its continuous listing requirements,” Mr Ouma added.

The development of these guidelines was informed by the workings of various global markets such as the Johannesburg Stock Exchange, the Sao Paulo Stock Exchange, Stock Exchange of Mauritius Development and Enterprise Market among others.

From these global experiences, the NSE developed the Nairobi Stock Exchange Nominated Advisers Rules, 2011 while the Authority has proposed an amendment of the Capital Markets Licensing Requirements General Regulations 2002 to provide for the procedure for SME listings.

The regulations are now awaiting the input of capital markets stakeholders and the general public who have until September 20 to provide feedback.

The proposed regulatory framework which should be ready by December this year will enable CMA, the NSE and others parties involved in the process to develop a conducive regime that facilitates the entry and participation of SMEs in the bourse.

With this development, SMEs whose importance in the country’s economic development cannot be gainsaid, will be incubated and nurtured until they graduate to the main investment market.

When this is done, Kenya will have moved a step closer in deepening of its capital markets and can look forward to the innumerable benefits including raising the level of savings and investments that this initiative portends.

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