Do not depend on the advertisement of the investment product or on social media chatter and promises of huge returns. Choosing an investment product can be like grocery shopping. Lots of products with lots of fancy packaging.
As an investor, you need to look beyond the packaging and read the composition of ingredients used to make a product.
The capital market landscape in Kenya is changing daily and intending investors need to be sufficiently informed about investment products before spending their money.
The following questions will help investors make a proper investment choice:
Is the Investment Licensed in Kenya?
Every market participant in the Kenyan capital market whether primary or secondary has to be licensed by the regulatory body which is the Capital markets Authority, CMA.
As an intending investor, you should get the name of your broker or dealer/investment provider and head to the CMA website to check the list of licensees to see if your broker is legitimate.
Trading participants such as brokers, dealers etc. must satisfy all CMA requirements before they are deemed “fit and proper” to do business in Kenya. This is not bureaucracy but is so for the protection of the investor from scam brokers.
What are the Benefits of dealing with a licensed market participant?
Investor compensation fund
The Investor Compensation Fund (ICF) is a fund set up by CMA to compensate any investor who suffers erosion of funds due to system glitches or negligence by a trading participant while carrying out their duties.As per law, the Investor can receive a maximum compensation amount of Kes. 50,000.The investor is compensated when the reason for the loss of funds is not his. Dealing with a licensed firm means you qualify for compensation from the ICF. Transparency and fair trade When you do business with a licensed firm you can rest assured you will not be cheated and your trades will be executed as at when due and with your best interest at heart.This is because the CMA monitors everything the licensed members do and has the statutory powers to intervene & carry out disciplinary action in case there is some dispute, to ensure fair dealing by its members. How Does the Investment Instrument Work? The capital market in Kenya is saturated with various types of financial products from simple ones like debt instruments to complex ones like derivatives.Whichever you choose to invest in, you need to take out […]