Code of Ethics
Standards of Professional Conduct for Members
1. Preamble & Definitions
2. Application
This Code of Ethics and Standards of Professional Conduct shall apply to all members of the Kenya Association of Stockbrokers and Investment Banks and their agents and shall be read in conjunction with the Capital Markets Authority Act, Cap 485 A Laws of Kenya, the Rules set out thereunder, the Rules, Regulations and Guidelines promulgated by the Authority, the Constitution of the Kenya Association of Stockbrokers and Investment Banks and the Rules and Regulations of the Nairobi Securities Exchange Limited.
3. Relationship With Clients
Conduct of business
The stockbroker shall act with utmost faith, integrity and dignity while handling the business of his clients.
Misrepresentation
The Stockbroker shall not use any misrepresentation and /or misleading information or conduct or any inducement to obtain business from clients.
Advertisement
All advertisement or publication of the Stockbroker's business shall be subject to sub clause (b) above.
Confidentiality
The Stockbroker shall treat the records, information and matters of his client's business with utmost confidentiality and shall not disclose the same to third parties except with the client's consent or when required by law, the Authority or the Exchange to divulge the same or when the same is in furtherance of a breach of any of the Laws of the Republic or of these Rules, the Constitution or the Rules and Regulations of the Exchange.
Justification of disclosure
The Stockbroker should be ready to justify his action of disclosing information communicated to him by his client concerning matters within the scope of the confidential relationship.
Competence
The Stockbroker shall act with competence, diligence and proper care in conducting his client's business and shall strive to maintain the same both on his part and on the part of his agent(s).
Negligence
The Stockbroker shall avoid any negligent conduct in the affairs of his clients and shall give skilful services to the clients and avoid undertaking services for clients in which he does not have adequate knowledge and competence.
Capability
The Stockbroker shall not make any statements whether orally or writing which misrepresent the services that he is capable of rendering to his client.
Independence
The Stockbroker shall use reasonable care and proper judgement in all relationships and contacts with a client to achieve and maintain independence and objectivity.
Fiduciary Duties
In all relationships with clients the Stockbroker shall use reasonable care in determining an undertaking of fiduciary duties and shall perform the same to his clients owed.
Investment recommendations
The Stockbroker shall exercise utmost diligence in making investment recommendations to his clients or in taking any investment action for them.
Basis for investment recommendations
The stockbroker shall have a reasonable and adequate basis for the recommendations and actions under clause 4 sub-clause (K).
Suitability of Investment Recommendations
The Stockbroker shall consider the appropriateness and suitability of any investment recommendation for his client and shall take into account the needs and circumstances of the client and the basic characteristics of the investment involved and in so doing shall be required to use reasonable judgment to determine the applicable relevant factors.
Disclosure on Investment Recommendations
The stockbroker shall disclose to his client the basic formal and general principles of the investment process by which securities are selected and portfolios are constructed and shall promptly disclose to the client any changes that may significantly affect those processes.
Misrepresentations on expected Performance
The Stockbroker shall not make any statements whether In writing or orally which misrepresent the expected performance of any investment.
Guarantees on Investments
The Stockbroker shall not orally or in writing explicitly or implicitly make any guarantees of any investment or its return except in communication of accurate information as to the terms of the investment instrument and the client's obligations thereunder.
Past performance
The Stockbroker shall not make any statements orally or in writing which misrepresent his past performance in investments or what he can reasonably be expected to accomplish in investments.
Performance Information
The Stockbroker shall only communicate to his client whether directly or indirectly, such performance information as is reasonably fair, accurate and complete.
Legend on Performance Information
The Stockbroker while presenting his performance information may use the following legend: 'This report has been prepared in compliance with the Performance Presentation standards of the Kenya Association of Stockbrokers and Investment Banks'.
Fairness
The Stockbroker shall openly and fairly deal with his client when disseminating investment recommendations or material changes in any prior investment advice or information given to the client.
Conflict of Interests
The Stockbroker shall conduct himself in such a manner that transactions for his clients have priority over transactions or securities or other investments of which he is the beneficial owner.
Beneficial Owner
For purposes of these Rules the Stockbroker is a 'beneficial owner' if he directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the securities or the investment.
Disclosure of Conflicts of Interests
The stockbroker when making investment recommendations to or taking investment actions for his client shall disclose to the client any material conflict or interest.
Compliance with the Law on Disclosure
The Stockbroker shall further to the foregoing comply with all requirements as to disclosure of conflicts of interest imposed by any Law and by the Rules and Regulations of the Exchange.
Commissions
The Stockbroker shall at all times charge his clients and cede to his agents, the Exchange and the Authority the commissions prescribed by the Exchange and the Authority.
Consideration for recommendation
The Stockbroker shall make an appropriate disclosure to a prospective client of any consideration paid or to be paid for recommending his services.
Availing Information to Clients
The Stockbrokers shall avail to any client who requests at the client's costs, the last audited balance sheet for his firm, the fixed scale of charges and the names, of the directors or principals of the business.
Clients' Complaints
The Stockbroker shall have in operation a proper and expeditious procedure and mechanism for resolving the complaints of clients that relate to the business of the client.
4. Relationship With Other Stockbrokers
Independence
The Stockbroker shall conduct his business in an independent manner and free from any influence of and or control by another Stockbroker.
Discipline
The Stockbroker shall maintain a high decree of discipline in the conduct of his business and shall treat the other Stockbrokers with dignity and all due courtesy and respect.
Demeaning Colleagues
The Stockbrokers shall not conduct himself or allow his agent to conduct himself in such a manner as to demean another Stockbroker.
Co-operation
The stockbroker shall co-operate with the other Stockbrokers in all matters pertinent to a fair, orderly and transparent conduct of the business of Stockbrokers.
Sharing Knowledge
The Stockbroker shall share with the other Stockbrokers any knowledge or information which he has and which the other Stockbrokers do not possess or which may not be widely available.
Promoting Knowledge
The Stockbroker shall do all he can to promote the knowledge, education, experience and good conduct of the other Stockbrokers.
Malicious Advertising
The Stockbrokers shall advertise or publicize his business in such a manner as not to maliciously impute incompetence or bad conduct on other Stockbrokers.
False Market Prices
The Stockbrokers shall not create false market prices or do anything that would be detrimental to the interests of other Stockbrokers.
Plagiarism
The Stockbroker shall acknowledge the use of material of other Stockbrokers or persons unless the material consists of factual information published by recognized financial reporting services.
5. The Stockbroker & The Market
Compliance with the law
The Stockbroker shall familiarize himself and comply with all Laws, Rules and Regulations Governing his business including the Provisions of the Act.
Inquiries
The Stockbroker shall comply with any inquiries or investigations lawfully undertaken by any competent authority or the Exchange.
Criminal Conduct
The Stockbroker shall not engage in any fraudulent or dishonest conduct or commit a criminal offence.
Integrity
The Stockbroker shall maintain a high degree of integrity in the conduct and performance of his business.
Transparency
The stockbroker shall do all he reasonably can to preserve and improve the dignity and quality of the business at the market.
Conflict of Interests
The Stockbroker shall ensure that there is no conflict of his interests with those of the market and that in the event of such conflict arising, the Stockbroker's interests should be subordinate to those of the market.
Protection of the Market
The Stockbroker shall do all he reasonably can to protect the market from any threat or possibilities of adverse effects.
Circulating False Information
The Stockbroker shall reasonably ensure that no misleading, false or alarming information is circulated in the market.
Development of the Market
The Stockbroker shall do all he reasonably can to ensure the development and advancement of the market.
Research
The Stockbroker shall strive to acquire proper knowledge of the business at the market and for that purpose he is to carry out such research and investigations as would be necessary.
Facts and opinions
The Stockbroker shall use reasonable judgment as to the inclusion and application of any applicable factors in research reports and shall distinguish between facts and opinions.
Research Report for Public
The Stockbroker shall indicate the basic characteristics of any investment involved when preparing for general public distribution a research report.
Employees
The Stockbroker shall ensure that all persons employed or appointed in his business do comply with these Rules and are persons of great integrity.
Conduct of business
The Stockbroker shall take all reasonable measures to ensure that his business is conducted free from any fraudulent or deceitful conduct.
Records and books
The Stockbroker shall maintain the minimum books and records with full disclosures as prescribed by the Authority and the Exchange.
6. Settlement of Disputes
Disputes
If any dispute concerning the business if the stockbrokers arises (i) Among stockbrokers or (ii) Between stockbrokers and third parties, it shall be referred to the board for arbitration.
Arbitration committee
The Board shall appoint any three (3) of its members to constitute an 'Arbitration Committee' which will hear all the facts relating to the dispute and deliver its considered decision.
Hearing
The Arbitration Committee may hear any person as a witness in its proceedings.
Appeals
Any Stockbroker or party not satisfied with the decision of the Arbitration Committee shall appeal to the full council not later than fourteen (14) days from the date of the decision.
Decision of Council
The full Council shall hear the appeal and deliver its considered decision which shall be final.
Charge
Any alleged breach of the rules herein by a broker shall be dealt with in a like manner as the resolution of disputes.
Service
Any notice required to be served herein shall be in writing and shall be sufficiently served on the Stockbroker if left addressed to him on his business premises.
7. Sanctions
Breach of the rules
Any Stockbroker who is found to be in breach of these rules as hereinabove provided shall be guilty of an offence and subject to penalties as prescribed herein.
Penalties
Sanctions may include: i) Suspension (max 6 months), ii) Expulsion, iii) Fines (max Kshs 100,000/=), iv) Recommendation for license cancellation.
Use of fines
All fines paid by members shall go to the Association's account for use by the Association for the attainment of its objects.
8. General
Disputes on Interpretation
If any dispute arises as to the interpretation and /or application of these rules the same shall be resolved in a like manner as a dispute under clause 7.
Amendment of the rules
These rules may be amended as and when need arise PROVIDED that the amendment is approved by not less than half of the members who are present in person or by proxy.