The Nairobi Securities Exchange (NSE) has formally revised its market segmentation following the Capital Markets Authority’s (CMA) approval of the Capital Markets (Public Offers, Listings and Disclosures) Regulations, 2023.
Effective from 15 December 2023, these reforms marked a significant capital markets restructuring in over two decades.
Bowman’s legal firm underscores the scale of change:
“The new regulations provide a welcome update to the well-out-of-date 2002 framework,” said Bowmans legal analysts. “They aim to resolve long-standing ambiguities and modernize Kenya’s capital markets architecture.”
Segments for Equity and Debt Instruments
The NSE’s former segmentation has been replaced by a leaner, two-tier structure:
| Old Segment | New Segment |
|---|---|
| Main Investment Market Segment (MIMS) | Retained and expanded for equity and bonds |
| Growth Enterprise Market Segment (GEMS) | Merged into SME Market Segment |
| Alternative Investment Market Segment (AIMS) | Merged into SME Segment |
| Fixed Income Securities Market Segment (FISMS) | Redistributed into MIMS and SME FISMS |
Under this layout:
- MIMS: Reserved for mature entities across both equity and fixed income markets
- SME Segment: Consolidated platform for emerging firms, offering relaxed listing requirements
Bowman notes that listing thresholds have been revised to widen access:
“The free float for SMEs has been reduced to 10% with a minimum of seven shareholders, lowering entry barriers,” the firm highlights.
What This Means for Investors
For institutional and retail investors, the twin reforms, regulatory and structural, bring increased transparency, clearer risk profiles, and renewed growth potential in Kenya’s public markets.
Key Investor Impacts
- Improved Comparability: Firms are grouped based on size and maturity, making peer benchmarking easier
- Expanded SME Access: The streamlined SME segment is poised to attract early-stage firms with relaxed conditions
- Heightened Compliance Oversight: Listed companies must now appoint compliance officers by December 2024, potentially boosting corporate governance
- Recovery List Mechanism: Issuers failing key obligations may be placed under time-bound listing rules to protect investor interests
Legal Insights: Modern Tools and Broader Market Coverage
Bowmans also spotlights forward-looking provisions now codified in the regulations:
- Digitalisation & Innovation: Introduction of electronic offers, SPACs, green-shoe options, and green bonds reflects evolving global practices
- Updated Disclosure Thresholds: For instance, shareholder approvals are now needed for disposals exceeding 10% of net asset value
- Director Independence Clause: The maximum tenure for independent directors is shortened from 9 to 6 years
Moreover, all ongoing CMA applications filed before the regulation’s start date will remain under the former legal regime during the transitional phase, which extends until late 2024.
“The reforms position Kenya as a modern capital markets jurisdiction,” Bowmans observes, “but implementation directives—particularly from the NSE—are still pending.”
Market Overview After Segment Reclassification
Equities
| Segment | Issuers | Key Players |
|---|---|---|
| MIMS | 57 | Safaricom, Equity Group, EABL, KCB, BAT, Bamburi, EAPC |
| SME | 9 | Homeboyz Entertainment, NBV, Kurwitu Ventures |
Fixed Income
| Segment | Issuers | Instruments |
|---|---|---|
| MIMS Bonds | 4 | Family Bank MTN, EABL MTN, KMRC MTN, Linzi 003 IABS |
| SME FISMS | 1 | Real People Kenya MTN |
