Almost every obligation in the Capital Market Act 2015 is backed by a criminal offence. The table below collects the main ones. Section references are to the Capital Market Act unless the Securities Commission Act 2015 is named.
The general rules
A person who contravenes any requirement or provision of the Act commits an offence and, “where no penalty is expressly provided”, is liable to a fine not exceeding K10,000,000 or imprisonment for a term not exceeding ten years, or both. For a continuing offence a further fine of up to K5,000 applies for every day the offence continues after conviction.
The Securities Commission Act has its own general penalty, and it is heavier: a fine of up to K15,000,000 or 15 years’ imprisonment, or both, with the same K5,000 daily fine (section 103). Section 107 of that Act makes every offence under a securities law an indictable offence unless the provision says otherwise. Section 464 of the Capital Market Act and section 102 of the Securities Commission Act require the written consent of the Public Prosecutor before any prosecution. Section 456 makes directors and officers of a guilty company liable too; see directors’ liability.
The main offences
| Section | Offence | Maximum penalty |
|---|---|---|
| Markets (Part II, ss 8–33) | ||
| 8(5) | Operating a stock or derivatives market without approval | K10m or 10 years, or both |
| 21(8) | Exchange permitting trading contrary to a Commission notice | Exchange K10m; each director K5m or 7 years |
| 23(8) | Contravening a suspension order | K5m or 7 years, or both |
| 30(2) | Operating a clearing facility without approval | K10m or 10 years, or both |
| Licensing (Part III, ss 34–57) | ||
| 34(4) | Carrying on a regulated activity without a capital market licence | K10m or 10 years, or both |
| 35(2) | Acting as a representative without a representative’s licence | K5m or 5 years, or both |
| 47 | False statement in a licence application | K10m or 10 years, or both |
| 48(11) | Carrying on business after revocation or during suspension | K10m or 10 years, or both |
| 75(2) | Short selling | K10m or 10 years, or both |
| Client assets and records (ss 85–113) | ||
| 88(3) | Failing to pay client money into a trust account | K5m; with intent to defraud K10m or 10 years |
| 90(3) | Improper withdrawal from a trust account | K10m or 10 years, or both |
| 113 | Destroying, concealing or altering books | K10m or 10 years, or both |
| Issues and prospectuses (Part IV, ss 116–152) | ||
| 120(5) | False or misleading statements to the Commission | K10m or 10 years, or both |
| 128(7) | Offering securities without a registered prospectus | K10m or 10 years, or both |
| 131(7) | Non-compliant prospectus (issuer and each director) | K10m or 10 years, or both |
| 142(3) | False or misleading prospectus | K10m or 10 years, or both |
| Unit trusts (Part V, ss 184–263) | ||
| 184(2) | Operating an unregistered scheme | K10m or 10 years, or both |
| 191, 192 | Breach of trustee’s or officers’ duties | K10m or 10 years, or both |
| 193(9) | Breach of scheme trust account rules | K5m; with intent to defraud K10m or 10 years |
| 194(4), 196(3), 197(2) | Misapplying scheme assets; breaching the deed; trustee acquiring units improperly | Each director K1m or 5 years, or both |
| 220(2) | Failing to send meeting communications to the auditor | Trustee K5m; directors and CEO K1m or 5 years |
| 248(5) | Failing to keep minute books | Trustee K1m; each director K100,000 or 2 years |
| 257(4) | Allowing withdrawals contrary to the deed | Trustee K500,000; each director K100,000 or 7 years |
| Takeovers (Part VI, ss 292–294) | ||
| 278(4) | Breach of the Takeovers Code | K10m or 10 years, or both |
| 293 | Breach of a Commission restraining or compliance order | Individual K1m or 5 years; company K10m and each director K1m or 5 years |
| 294(3) | False documents in a takeover | K10m or 10 years, or both |
| Market misconduct (Part VII) | ||
| 306 | Manipulation, false statements, fraud (ss 299–305) | K10m or 10 years, or both |
| 307(6) | Insider trading and tipping (figure garbled in print) | K10m or 10 years, or both |
| 333 | Derivatives misconduct (ss 326–332) | K10m or 10 years, or both |
| Systemic risk (Part VIII) | ||
| 337(4), 338(7) | Ignoring a systemic risk notice or directive | K10m or 10 years, or both |
| Disclosure by listed corporations (Part X, ss 375–386) | ||
| 377(3) | Prohibited conduct by a director or officer of a listed corporation | K10m or 10 years, or both |
| 381(2) | Influencing false financial statements or audits | K10m or 10 years, or both |
| 386 | Interests register offences | K1m |
| General (ss 449, 456–461) | ||
| 457, 458, 460 | Falsifying records; false reports to the Commission or exchange; destroying records | K10m or 10 years, or both |
| 461 | Any other contravention | K10m or 10 years, or both; K5,000 a day |
| Securities Commission Act 2015 | ||
| 93 | Refusing to appear, answer or produce; deceiving the Commission | K5m or 7 years, or both |
| 94–97 | False information, obstruction, contempt of the Commission, concealing books | K10m or 10 years, or both |
| 103 | Any other contravention | K15m or 15 years, or both; K5,000 a day |
Penalties without a prosecution
The Commission may also impose administrative penalties of up to K5,000,000 (section 443), or K10,000,000 on a licensed person (section 445) or for Takeovers Code breaches (section 280); sue for civil penalties and treble gains for market misconduct (sections 324, 325, 335); or compound an offence (section 462). See administrative penalties, civil recovery and compounding.
Some printed penalties are garbled (section 96(7) reads “K10,000,00.00”; section 249(6) “K1,000,0000.00”; section 194(3) sets a “minimum” fine). Anyone facing a charge should work from the certified Act.
Sources
- Capital Market Act 2015 — ss 8–33, 34–57, 85–113, 116–152, 184–263, 278–294, 306, 307, 324, 325, 333, 335, 337, 338, 377, 381, 386, 443, 445, 456–464
- Securities Commission Act 2015 — ss 93–97, 102, 103, 107
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.