Every licence issued by the Capital Markets Authority (CMA) now goes through the same processing stages under the Capital Markets (Licensing Requirements) (General) Regulations, 2025 (Legal Notice No. 197 of 2025). The stage that shapes most project plans is approval in principle: it lets an applicant build its business, but not run it, and it expires after six months. This article explains how the stages work, what the CMA looks at in the people behind an application, and what happens to fees and conditions once a licence is granted.
The application
Applications are made on Form 1 in the First Schedule to the Regulations, with the documents listed in the regulation for the relevant licence category. For an investment adviser, for example, regulation 12(3) lists the supporting documents, including evidence of financial resources, a business plan and professional indemnity cover. Our guide to the investment adviser licence covers those requirements, and our overview of CMA licensing in Kenya covers the other categories.
A licensee that wants to add another licensed business does not start from scratch. Under regulation 52, it applies on Form 1 for the additional licence and must meet the requirements the CMA sets for that category.
Approval in principle
Regulation 49(1) provides that, once the CMA receives a complete application, it may grant approval in principle if the application substantially meets the requirements. It may instead ask for more information or impose conditions.
Approval in principle is a permission to prepare, not to trade. Under regulation 49(2), the applicant may set up its operating facilities and recruit staff, but it may not start operating until the final licence is issued. Under regulation 49(3), once it has met all the requirements and conditions, it must notify the CMA in writing and provide evidence of compliance.
The clock matters. Regulation 49(4) makes approval in principle valid for six months. An applicant that has not met the outstanding requirements in that period must make a new application. In practice that means lining up premises, systems, key staff, insurance and capital before applying, so that the six months is spent completing, not starting.
What the Regulations do not say
The 2025 Regulations do not set a deadline for the CMA to decide an application, and they do not contain a specific provision on refusal or on giving reasons. Applicants should build time for review and follow-up questions into their plans. Where a decision is adverse, the general law on fair administrative action, including the Fair Administrative Action Act, 2015, remains relevant.
The fit and proper test
Regulation 56(1) requires each director, the chief executive officer and key personnel of a market intermediary to be fit and proper. Regulation 56(2) lists the matters the CMA considers. They include:
- probity, competence, soundness of judgment and diligence;
- convictions, offences, irregularities, misappropriation or market manipulation that could put customers at risk;
- having been a director of an entity that is liquidated, in liquidation or under statutory management;
- conviction for an economic crime under the Anti-Corruption and Economic Crimes Act, the Bribery Act or the Proceeds of Crime and Anti-Money Laundering Act;
- past performance, skills, experience, technical knowledge, professional qualifications and membership of relevant professional institutions; and
- financial soundness, including unsatisfied judgment debts, arrangements with creditors, bankruptcy and a satisfactory credit reference.
Applicants should check each director and key person against this list before filing. An unsatisfied judgment or an old directorship of a failed company is better explained in the application than discovered by the CMA.
Grant, conditions and duration
Under regulation 50(1), the CMA grants the licence once it is satisfied the requirements are met and the Sixth Schedule fees are paid. Under regulation 50(2), it may impose conditions, and may vary them by written notice at any time.
The Regulations do not give licences a fixed term. Regulation 50(4) provides that a licence remains valid unless suspended or revoked under sections 26 and 26A of the Capital Markets Act. What recurs is the annual regulatory fee under regulation 50(3). Under regulation 51, annual fees are payable in full for the year of first issue, without pro-rating, and fees already paid are not refunded if the licence is later revoked, withdrawn or surrendered.
A licence is also not static. Under regulation 53, applicants and licensees must give the CMA an updated business plan as soon as reasonably practicable after a material change in their business or operating environment.
Existing licensees
Licences issued before the 2025 Regulations came into force remain in force until revoked. Where the new Regulations add requirements, regulation 58(1) gives existing licensees twelve months from commencement to comply.
How We Can Help
Clay & Associates Advocates prepares and manages CMA licence applications, runs fit and proper checks on directors and key personnel before filing, and plans the approval-in-principle period so that it closes on time. Read our article on choosing the right CMA licence category, or contact our Regulatory & Compliance practice.
Sources: Capital Markets (Licensing Requirements) (General) Regulations, 2025 (LN 197 of 2025), regulations 12, 49 to 53, 56 and 58; Capital Markets Act (Cap. 485A), sections 26 and 26A.
Frequently asked questions
How long is CMA approval in principle valid?
Six months under regulation 49(4). If the requirements are not met within that time, a new application is needed.
Can we start business once we have approval in principle?
No. You may set up facilities and recruit staff, but operations may only start once the final licence is issued (regulation 49(2)).
Do CMA licences need to be renewed every year?
The 2025 Regulations give licences no fixed term. A licence stays valid unless suspended or revoked, but an annual regulatory fee is payable.
Who must pass the fit and proper test?
Each director, the chief executive officer and key personnel of a market intermediary (regulation 56).
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This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.
