The Capital Markets Authority (CMA) has introduced permits for robo-advisory firms, expanding its regulatory ambit amid a surge in the number of younger and tech-savvy investors.
Robo-advisors are automated, algorithm-driven platforms that provide low-cost investment portfolio management with minimal human supervision. The concept is popular among youthful tech-savvy investors and passive investors.
The Capital Markets (Licensing Requirements) General Regulations, 2025, which are currently before Parliament, propose to regulate more players in the digital investment advisory space in line with the shifting technology.
“The CMA will now be able to licence robo-advisory firms, following the expansion of the definition of investment advisors to include digital platforms that provide automated, algorithm-driven investment advice,” analysts at law firm Bowmans said in a note regarding the proposed new rules by the CMA.
Globally, providing online investors access to a human adviser is growing more popular in the wealth management industry, as studies have shown many clients prefer a combination of digital and personal advice.
Assets under Management (AUM) for robo-advisors are projected to grow significantly, driven by younger investors and improved digital tools.
Youth in Kenya are heavily involved in Money Market Funds and investment apps, which promise high yields.
The CMA has also introduced a new licence category for intermediary service platform providers, who are operators of ‘a digital application or otherwise which facilitates aggregation, marketing and distribution of capital markets products and services’.
“This provides a new licence category for web and mobile-based service providers, who previously had to enter into partnerships with existing licensees to provide their services. Entities that already hold a licence from the CMA are excluded from having to obtain an intermediary service platform provider’s licence” the analysts at Bowmans further said in their note.
The 2025 CMA regulations have also introduced a new broker-dealer licence in a bid to spur investment growth.
“Broker-dealers will be hybrid licensees, empowered to engage in both stockbrokerage as well as dealer business, and the arranging of underwriting services in issuances of securities. Broker-dealers will be permitted to deal on their own account, which stockbrokers are explicitly prohibited from doing,” Bowmans noted.
The 2025 Regulations have additionally provided licensing requirements for trustees and custodians. “However, there are discrepancies with respect to the licensing provisions for these two licences – between the 2025 Regulations and the Capital Markets (Collective Investment Schemes) Regulations 2023 (CIS Regulations), which remain in force.
Clarity will be required from the CMA regarding these issues, particularly in respect of capital requirements, delegation of roles among others” the law firm said.
