CMA to shake up boards, C-suites of blue-chip firms with new rules

The Capital Markets Authority (CMA) is set to crack down on errant listed firms with the new, stringent corporate governance regulations that are poised to become law. The new Capital Markets (Corporate Governance) (Market Intermediaries) Regulations, 2025, will significantly shake up the boardrooms and C-suites of Kenyan blue-chip firms, some of which have at times been on the spot for governance breaches. 

The new rules aim to boost market integrity and investor confidence. They are designed to curb misconduct and ensure accountability across the financial sector. The CMA last week concluded collecting views on the draft rules from various stakeholders, paving the way for their ratification.

The regulations are designed to fundamentally reshape oversight, enhance accountability, and instill greater independence within firms operating in the capital markets, experts say.  The rules propose the separation of the chairman and chief executive officer (CEO) roles.  The regulations state that “the chairman of the board shall not be appointed as the CEO of the market intermediary.” 

This provision directly challenges any existing structures where a single individual holds both top positions, forcing a clear division of power and responsibility to prevent unchecked executive authority. The chairman is now explicitly required to be a non-executive or independent director, solidifying the supervisory nature of the board’s leadership over the executive function.

Beyond the leadership split, the new rules significantly redefine “independent directors” and their crucial role. 

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To qualify as an independent director, one must not own shares in the company. He or she must not have been an executive or employee in the past three years, nor have had any significant business relationship with the firm in the last five years. 

At the same time, independent directors will now face a six-year term limit from their first election.  This measure is designed to prevent board entrenchment and ensure a regular influx of fresh perspectives and truly unbiased oversight, compelling many long-serving board members to rotate out.

 Under the new rules, the composition of boards will also see noticeable changes. The regulations mandate that at least one-third of a market intermediary’s board must consist of independent directors.  This increases the required proportion of truly independent voices, potentially shifting the balance of power within boardrooms and empowering non-executive directors to more robustly challenge management decisions and prevent potential misconduct. 

To curb familial influence and potential conflicts of interest, the rules also cap “close relations” – defined broadly to include spouses, parents, siblings, children, and in-laws of any director – at not more than one-third of the board’s composition.  The new framework tightens the reins on the broader C-suite through enhanced oversight mechanisms. 

“The chairperson of the Audit Committee must now be an independent director, and at least one committee member must be a certified auditor,” notes the draft rules.

This elevates the scrutiny of financial reporting and internal controls, placing greater demands on Chief Financial Officers (CFOs) and other senior finance executives to ensure integrity. 

Additionally, the rules dictate that the chairman of the board cannot serve on any committee, ensuring a clear separation of oversight roles. New dedicated roles like the Risk Management Officer (RMO) and Compliance Officer will add layers of direct scrutiny over operations. 

The RMO is tasked with reviewing risk control systems and reporting quarterly to the audit committee. 

More notably, the Compliance Officer will monitor regulatory adherence, have direct access to the board, and can even be held personally liable for failing to identify and report non-compliance. 

This provision places significant direct responsibility on a key C-suite-level position, making accountability for breaches unavoidable.  Boards are also now explicitly responsible for establishing and monitoring internal control systems, which directly impacts the accountability of executive management.

The capital markets regulator also gains considerable power over C-suite appointments and dismissals.

The regulations introduce stringent “fit and proper” requirements for all directors and key personnel.  More importantly, any change in shareholders, directors, chief executives, or other key personnel requires prior written confirmation from the Authority. 

This provision gives the regulator an unprecedented level of control over who can lead and manage Kenya’s market intermediaries, ensuring that individuals meet strict integrity and competency standards aimed at preventing rogue actors. 

Boards are also mandated to develop charters, codes of conduct, and continuously review their corporate governance structures and management performance. These reforms have already rattled the market as they usher in a significant overhaul in the governance structures of many Kenyan firms, particularly those with long-serving directors or intertwined interests. 

While some larger, publicly traded companies may already adhere to many of these principles, the universal application to all market intermediaries signifies a broader push for stricter adherence.