This alert examines how the PFIA, once central to the regulation of public investment activity, has been outpaced by reform, particularly following the enactment of the Capital Markets Authority Act Cap. 485A (CMA Act) and modern financial crime legislation such as the Proceeds of Crime and Anti-Money Laundering Act Cap. 59A (POCAMLA). While the PFIA remains legally operative, its regulatory relevance has been significantly diminished.

The PFIA regulatory purpose

The PFIA is primarily a penal statute, enacted to prevent and punish the fraudulent inducement of the public to invest.

It regulates dealings in securities, provides for the licensing of investment and securities businesses, and criminalises fraudulent investment conduct.

A defining feature of the PFIA was the establishment of the New Issuers Committee (Committee), vested with the authority to approve prospectuses for public offers of securities. The Committee could approve, with or without conditions, or reject applications based on public interest considerations. Failure to obtain approval constituted a criminal offence under the PFIA, with appeals lying to the Cabinet Secretary, whose decision was final.

At the time of its enactment, this framework positioned the PFIA as both a regulatory mechanism and an enforcement tool in the capital markets.

Regulatory reform and the rise of the Capital Markets Authority

The enactment of the CMA Act marked a structural shift in the regulation of securities and public investment in Kenya. The CMA Act established the Capital Markets Authority (CMA) as a specialised regulator mandated to supervise, regulate and enforce compliance within the capital markets, with a broader objective of promoting the development of an orderly, fair and efficient capital market.

Under the CMA Act and its subsidiary legislation, the CMA’s regulatory mandate is principally exercised through an enforcement and supervision-based framework, which includes responsibility for:

• approving public offers of securities;
• vetting and approving prospectuses;
• overseeing listings on securities exchanges; and
• enforcing disclosure and market conduct standards.

This comprehensive, disclosure-based regulatory regime effectively displaced the PFIA’s approval framework, including the role of the Committee, without formally repealing it.

The PFIA in a modern financial crime framework

Despite its diminished regulatory role in addressing financial crime, the PFIA remains in force and capable of enforcement as a criminal statute. However, its operation now exists alongside more contemporary legislation, most notably POCAMLA.

POCAMLA reflects a modern, institutionalised approach to financial crime regulation, establishing bodies such as the Financial Reporting Centre and expanding the scope of regulated financial misconduct beyond traditional investment fraud. This evolution has further relegated the PFIA to the periphery of Kenya’s financial regulatory framework.

Current legal and practical position

In practice, the CMA is the sole authority responsible for the approval of public offers and listings of securities in Kenya. Market participants engage exclusively with the CMA and comply with its regulations when raising capital from the public.

The PFIA survives primarily as a residual penal statute, addressing fraudulent investment conduct rather than functioning as an active regulatory regime. Its institutional mechanisms, though legally preserved, no longer operate in the contemporary capital markets environment.

Conclusion

The PFIA demonstrates how statutory reform can overtake older legislative frameworks without express repeal. While the PFIA remains on the statute books, its regulatory architecture has been eclipsed by sector-specific regulation and modern financial crime laws.

This layered legal reality underscores the importance of understanding not only what the law says, but how it operates in practice. The PFIA is a cautionary example of how legislative inertia can leave behind laws that are valid in form, yet largely historical in function.