Why Amendments to the Capital Markets Authority Act Should be Made


Sometime in August, Miriam Ekirapa Musaali, the Capital Markets Authority (CMA) Director legal and Board affairs, said that “We are in the process of amending the Capital Markets Act so that we can have friendlier laws for participants in the market.”

Personally, I welcomed these comments with some sort of disquiet ambivalence, knowing what motivates the amendment of financial and business laws in this country. Most finance and business legislation is majorly influenced by foreign actors and a narrow group of people.

Since 2017, Capital Markets Authority has had running battles with many of its licensed persons over a poorly drafted law. At some point, the courts had to weigh in. In 2020, Tolea Securities, a company that offered Uganda’s first Exchange traded fund, had to wedge a legal warfare against Capital Markets Authority’s illegal assessment of their Exchange Traded Fund stock market product as an Asset Backed Security.

The conflict here arises when CMA attempts to regulate asset class offered on stock markets, yet the rules governing those asset classes on the approved stock market have already been considered by CMA.

In another development this year, a public spirited person had to petition Capital Markets Authority against their irregular grant of a brokerage license to Chipper Technologies (Chipper Cash). I wasn’t surprised when capital markets authority subsequently issued a public statement cautioning the public against dealing with chipper cash global stocks that were on offering. Yet it’s an entity they had licensed.    

In 2016, when the Capital Markets Authority Act was last amended, the law introduced IOSCO (International Organization of Securities Commissions) principles. IOSCO has principles on  the enforcement of securities regulation, for Collective Investment Schemes and those relating to clearing and settlement.

Therefore, in making laws to regulate the “securities and capital markets,” the law should follow IOSCO stipulations.

Subsequently, in early 2017, Capital Markets Authority of Uganda was admitted by the global securities standards setter International Organization of Securities Commissions (IOSCO) as a signatory to Appendix A of the IOSCO Multilateral Memorandum of Understanding (MMoU).

However, ever since Capital Markets Authority was admitted to the IOSCO, the Capital Markets Authority law, regulations and “ideological orientation” with which officials at CMA regulate the capital markets doesn’t really conform to their international obligations.

The CMA culture of securities regulation puts the market in Uganda years behind our competition on the continent. The lack of forward thinking and their failure to keep up with global trends is common place. I wasn’t surprised when Capital markets authority licensed a player who utilizes a concept of payments for order flow, something whose consequences they didn’t properly understand.

Capital Markets Authority should stick to being a regulator of conduct and behaviour of “licensed persons” instead of emulating the regulatory standards akin to a central bank.


The Capital Markets Authority is soliciting for views from stakeholders on proposed changes to the Capital Markets Authority Act. Click here to see the proposed areas for amendment.

Licensed players in the capital markets employ an Asset Under Management (AUM) model. This means that the money they get from the general public doesn’t form part of their “liabilities” on their balance sheets.

Unlike supervised financial institutions that keep customer deposits as part of their liabilities on their balance sheets, capital market licensed persons don’t keep “customer’s money” as a liability. The impact of regulating the capital and securities markets as though you are regulating banks is that you stifle innovation and focus on the wrong aspects of the market. This certainly makes the regulator make many mistakes while regulating the market. 

IOSCO principles have both financial and non-financial provisions. If the Capital Markets Authority wishes to ride on the financial IOSCO principles in order to introduce financial, capital and prudential requirements for market players, either in the law or regulations, they must demonstrate the risk for which they intend to mitigate. Capital requirements shouldn’t just be arbitrarily introduced for the sake of it.

For instance, Section 65 of the Securities Central Depository Act, 2009 introduces a capital buffer to deal with “settlement risk,” which is entirely justified. Here, a risk the capital requirements intend to mitigate is demonstrably justifiable in prudent market and legal practice.

Another area for law reform lies in section 90 G 2 (C), 90 G (1) and section 5 (1). According to section 90 G 2 (E) of the CMA law, scrutiny of the prospectus and issuance of a certificate of compliance lies with the exchange.

Section 5 (1) adds another layer of compliance by stating that the authority will approve that same prospectus. For those that followed the Mabirizi MTN IPO judicial review court action last year, you realize that this section exposed a conflict of interest.

It’s literally impossible to petition Capital Markets Authority to a prospectus it has approved. One is only left with an option of going to court to get a remedy from CMA.

Any lawyer who has practiced in the area of capital markets, structured financing and securities law will immediately realize that the Capital Markets Authority law has many redundant and unenforceable provisions.

The Capital Markets Authority Act, for example, assumes a Venture Capital fund is a company. However, the reality is different. Most Venture Capital funds world over are registered as limited liability partnerships that normally span eight to 10 years. They normally raise money from limited partners and not the general public.

Recently, the Capital Markets Authority sought to reinforce this in its proposed regulations for venture capital, which most of us opposed in the stakeholder meeting of June 8, 2022.

They also sought to introduce capital requirements for venture capital funds. I will ask this question again, which risk does Capital Markets Authority intend to mitigate with these capital requirements?

Capital Markets Authority should move out of regulating asset classes. It should just stick to regulating the behaviour of the persons that offer those Asset classes.

Capital Markets Authority officials need a cultural and ideological renaissance in the way they regulate the securities market for them to grow.

The law should further be amended to provide for a CMA sandbox to enable innovative venture capital funded start-ups to create disruptions in the industry.

In Kenya for example, Robo Advisory investments that leverage trade algorithms have been accommodated by the sandbox. Financial markets are undergoing a revolution and the CMA Act should be more progressive.


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