CENTRAL DEPOSITORY SYSTEM (CDS)

Meaning and Definition

The Central Depository System (CDS) refers to an electronic platform used for the safekeeping
and transfer of securities such as shares, bonds, and other financial instruments. It eliminates the
need for physical certificates by maintaining records of ownership electronically.

According to Section 2 of the Central Depositories Act, a Central Depository is defined as a

company that has been approved by the Capital Markets Authority (CMA) under Section 5 of the
Act to establish and operate a system for the central handling of securities. This system performs
several key functions, including:

a) Immobilization or Dematerialization of Securities

The Central Depository facilitates a process where all securities are either Immobilized, meaning
the physical certificates are stored in a central location but ownership is tracked electronically, or
Dematerialized, meaning the physical certificates are eliminated entirely and replaced with
electronic records.

b) Facilitation of Settlement and Registration of Transactions

The Central Depository provides a platform that enables the settlement and registration of
securities transactions, such as the buying and selling of shares, allows for ownership transfers to
be recorded electronically without the need for the issuance or exchange of physical certificates,
and reduces paperwork and administrative delays, making the process more efficient and secure.

c) Provision of Related Services

The Central Depository may also Offer auxiliary services that are necessary or incidental to the
management of securities, Support the infrastructure for capital market operations, such as
clearing, settlement, reconciliation, and reporting of transactions.

Key definitions

"Act" means the Central Depositories Act, 2000 and any rules made thereunder;

“Account” means a securities account

“Agency Agreement” means the agreement between a Central Depository agent and the Central
Depository, whereby the Central Depository appoints a CDA;

"Application date", in relation to any application under these Rules, means the date on which
the application is lodged with the Central Depository or a CDA ;.

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"Approved functions", in relation to any CDA, means those functions which have
been authorized or approved, from time to time, by the Central Depository under these
Rules to be performed by that agent;

“Authority” means the Capital Markets Authority established under section 5 of the
Capital Markets Act (Cap. 485A);

“Board” means the Board of Directors of the Central Depository;

"Buying depositor" means a depositor who places an order to purchase a book-entry

security;

“CDA” means Central Depository Agent and ―CDAs‖ means Central Depository
Agents;

“CMA rules” means Capital Markets (Central Depository) Rules, 2003 pursuant to
Section 65 of the Act;

"Central Depository" means the Central Depository and Settlement Corporation Limited a limited
liability company, incorporated in Kenya and approved under Section 5 of the Act;

"Cum entitlement date" means the date fixed by an issuer as being the last date for entitlement to
dividends, bonus issue, rights issue or other distributions to or rights of depositors in respect of
securities issued by the issuer;

"Eligible securities" means a security which has been prescribed by a securities exchange to be
immobilized with a Central Depository under section 13;

"immobilization date", in relation to any eligible security, means the date specified in the notice
given by a securities exchange under section 13 as being the last day on which the eligible security
may be traded on the securities exchange unless such security has been deposited with the Central
Depository;

"Jumbo certificate", in relation to a book-entry security, means a certificate comprising not less
than 10,000 units of securities of an issuer which is registered in the name of the Central Depository
or its nominee company, as a bare trustee for depositors, provided that the jumbo certificate may
be for fewer units if agreed with the registrar/issuer.

"Listed" means admitted to the official list of a securities exchange in Kenya and listing shall be
construed accordingly;

"Market day" means any day during which a securities exchange is open for business;

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"Member of the securities exchange" means a person licensed by the Authority and admitted
as a member to the securities exchange;

"Notification date", means the date on which the notice pursuant to sub-section 13(2) of the Act
is given by the securities exchange;

"Person" includes anybody of persons, corporate or unincorporated;

“Operational procedures” means the procedures adopted by the Central Depository from time
to time;

"Procedures Manual" includes any manual containing guidelines and operating procedures for
Central Depository agents, issuers and depositors, from time to time, issued by the Central
Depository;

"Record"

The term "record" refers to various forms of data or information storage, which include both
written and non-written forms of records. Specifically, the term encompasses the following:

(a) Photographs

Any photographic image, regardless of the medium on which it is captured or displayed.

(b) Devices Containing Sound or Other Data

This includes any device (such as a disc, tape, or sound track) where sounds or other forms of
data (that are not visual images) are stored in a way that allows them to be reproduced. This
reproduction can be done either with the help of other instruments or without them.

(c) Devices Containing Visual Images

This category includes any device (such as a film or tape) where visual images are stored in a
way that allows them to be reproduced, with or without additional instruments.

Rules” means the rules and any amendments thereto of the Central Depository and includes any
appendices to the rules.

"Rules of the securities exchange" shall have the same meaning as assigned to it under the
Capital Markets Act - Cap 485A as amended from time to time;

"Selling depositor" means a depositor who places an order to sell a book-entry security.

“Settlement bank” means the bank(s) appointed by the Central Depository to provide clearing
and settlement services.

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“Settlement partner” means any person appointed by a CDA with the approval of the Central
Depository to undertake the settlement obligations of the CDA.

“Services” means any of the Central Depository clearing, settlement and registration services
provided by the Central Depository.

“Securities exchange" or "stock exchange” means the Nairobi Stock Exchange Limited or
any
other securities exchange on which eligible securities may be listed;
"Stock market" means the stock market established by a securities exchange;

“T” means the market day on which a security is purchased or sold by or on behalf of a
depositor;

"Terminal" means any computer terminal located at the premises of a user which forms part of
the computer system;

"Transitional period", in relation to any eligible securities means the period immediately
following the notification date and ending on the immobilization date;

"user" means a Central Depository agent, an issuer, a securities exchange or such other person
as may be prescribed by the Authority who may be given access to a computer system of the
Central Depository;

Initial Public Offer (IPO) Deposits

 Dematerialization: The Central Depository may prescribe the dematerialization of

securities proposed to be listed, as per Section 24 of the Act.
 Securities Account Requirement for Investors:
 Investors wishing to subscribe to securities during an Initial Public Offer (IPO) or
any other subsequent offers must first open a securities account through a CDA if
they don’t already have one.
 The issuer will provide provisions for applicants without accounts to complete
Account Opening Forms when applying for shares.
 Account Opening and Allocation:
Investors must indicate their securities account number on the share subscription form
or complete the necessary Account Opening Form through a CDA before securities
allocation.
 Post-Allocation Notification: After securities allocation, the issuer will notify each
successful applicant that the allocated securities have been credited to their securities
account with the Central Depository.

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  Issuer’s Obligations: The issuer is still responsible for processing applications, allotting
securities, and appointing agents for any securities issued, even though these actions are
facilitated by the Central Depository.

Establishment of the Central Depository

The Central Depository is established under Section 4(1) of the Central Depositories Act. It is a
legal entity created to facilitate the electronic settlement of securities transactions and the
holding of securities in dematerialized form.

Any company that intends to establish and operate a central depository must follow a formal
application process governed by the Capital Markets Authority (CMA). The process includes the
following steps:

1. Application to the Authority

A written application must be submitted to the Capital Markets Authority (CMA) by the
applicant company, seeking approval to establish and operate as a central depository.

2. Submission of Required Documents

The application must be accompanied by:

 Central Depository Rules:

These are the internal rules and regulations that will govern the operations of the central
depository. They must be prepared by the applicant in a manner and form prescribed by
the Authority.
 Company Information:
Details of the applicant, including its incorporation documents, business plan,
shareholding structure, organizational structure, and governance framework.
 Technical and Operational Capabilities:
Information demonstrating that the applicant has the necessary systems, infrastructure,
and resources to operate a central depository efficiently and securely.
 Risk Management Framework:
A description of the measures in place to identify, assess, and mitigate operational and
financial risks associated with depository functions.
 Compliance and Legal Framework:
Evidence of the applicant’s capacity to comply with applicable laws, regulations, and
supervisory requirements.
 Additional Information:
Any other information or documentation that the Authority may request in support of the
application.

3. Review by the Authority

Once the application is received, the Authority shall:

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  Review the submitted documents.
 Request any additional documents or clarifications deemed necessary.
 Evaluate the applicant's suitability, including its financial position, expertise, governance,
and infrastructure.

4. Granting of Approval

If satisfied that all requirements have been met and that the applicant is capable of operating a
central depository in accordance with the law and regulatory expectations, the Authority may
grant approval for the establishment and operation of the central depository. Under Section 5 of
the Central Depository Act, the CMA may approve the application in writing if it is satisfied
that:

 The Securities Exchange is a shareholder in the applicant company.

 The Central Depository System (CDS) Rules comply with the rules set by the CMA.
 The establishment and maintenance of the Central Depository will promote the overall
development of Kenya’s capital markets.

Upon approving the establishment of the Central Depository, the Authority may impose the
following conditions:

 Capital Requirements: Specify the paid-up or authorized capital of the central

depository.
 Shareholding Conditions: Set conditions relating to the shareholding structure of the
central depository’s members.
 Governance Requirements: Establish requirements for the appointment of the central
depository’s board of directors and management team.
 Other Conditions: Impose any other conditions deemed appropriate by the Authority.

Functions of the Capital Markets Authority (CMA) under this Act

The CMA is tasked with the following functions under the Central Depositories Act:

 Ensure Compliance: Take necessary measures to ensure compliance with the provisions
of this Act. Additionally, the CMA must promote fairness, efficiency, competitiveness,
transparency, and orderliness in the deposit of securities and the clearance and settlement
of securities transactions.
 Supervision and Regulation: License, supervise, monitor, and regulate the activities of
central depositories.
 Set Competency Standards: Establish and enforce standards of competence for central
depository agents.
 Approve Rules: Approve the rules governing the operation of central depositories.
 Promote Good Conduct: Encourage and enforce proper conduct, competence, and
integrity among central depository agents.

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  Prevent Unlawful Practices: Counter and suppress illegal, improper, or unfair practices
in the securities market.
 Make Regulations: Formulate regulations that facilitate the implementation of the
purposes and provisions of this Act.
 Perform Other Functions: Carry out any other functions as conferred by this Act or any
other relevant legislation.

Rules of a Central Depository

A Central Depository must create and implement CDS Rules that address the following areas:

i Deposit, Registration, and Transfer of Securities: Rules governing how securities are
deposited, registered, and transferred within the system.
ii Settlement of Securities Transactions: Procedures for settling transactions involving
securities.
iii Regulation of Clearing Facility: Ensuring the proper regulation and efficient operation
of the clearing facility the central depository operates.
iv Default Process: The process for handling defaults by parties involved in securities
transactions.
v Settlement Guarantee Fund: The establishment and management of a fund to guarantee
settlements.
vi Qualifications for Agents: The qualifications required for the appointment of central
depository agents.
vii Regulation and Supervision of Agents: Ensuring that central depository agents are
properly regulated and supervised.
viii Exclusion of Unfit Agents: Preventing persons who are not fit and proper from
participating as central depository agents.
ix Disciplinary Actions: Establishing rules for the expulsion, suspension, or disciplining of
central depository agents.
x Business Operations: Ensuring the proper conduct of the central depository’s business,
with a focus on the protection and interests of investors.
xi Other Matters: Addressing any other matters as may be directed by the Authority.

Duties of a Central Depository

A Central Depository is responsible for:

 Establishing and Operating Facilities: The central depository must establish and
operate facilities for the centralized handling of securities.

 Fair and Transparent Arrangements: Ensuring that the facilities provide fair,
transparent, and efficient depository, clearing, and settlement arrangements for securities
deposited and any related transactions.

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  Fraud Prevention and System Protection: The central depository must implement
measures to prevent fraud and system manipulation, including:

 Safeguarding certificates and other documents deposited with the central depository.
 Protecting against falsification of records or accounts required by the Act.
 Ensuring an efficient system for tracing, verifying, inspecting, identifying, and recording
all transactions with the central depository.

 Fee Approval: Seeking approval for any fees proposed to be charged for the services it
provides.

 Prudent Risk Management: Ensuring that risks associated with the central depository’s
business and operations are managed prudently.

The Central Depository System Accounts (CDS Accounts)

Under Section 2 of the Central Depository Act, a securities account is an account established
by the central depository to record the book-entry securities and cash balances related to
securities transactions for a depositor.

Securities Account: An electronic account in which information about individual investors,

including share purchases, bonus issues, and rights issues, is maintained. Similarly, debits are
made for any sales or share forfeitures by the investor.

Regulations of CDS Accounts

 Section 30(1): No person can deal in book-entry securities unless they hold a securities
account with the central depository.
 Section 31(1): The central depository must issue a statement of accounts to all depositors
regarding the book-entry securities held in custody, either directly by the depository or
through a nominee company.
 Depositor’s Request: A depositor may request, in writing, a statement of accounts for
any or all of their book-entry securities held by the central depository or its nominee
company.
 Issuance of Statements: Upon receiving a written request, the central depository must
issue the requested statement of accounts, subject to payment of any charges specified
under the CDS rules.
 Prima Facie Evidence: The statement of accounts issued under Section 31 serves as
prima facie evidence of the accuracy of the information presented in the statement.

Operation of the CDS account

The CDS account is an electronic account that has been instituted to replace manual
share certificate with electronic accounts called immobilization account

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Membership to the CDS account is open to both individuals and corporate entities. This
means that any individual that has attained majority age qualifies to own and operate a
CDS account Only these entities that are duly registered with the registrar of companies
and registrar of societies are eligible to open a CDS account

Advantages of CDS accounts

 There are reduced chances of errors and frauds occurring

 Security for loans and other advances will be enhanced
 Confidentiality and privacy of individual accounts as access to one‘s account by
application and payment of a fee
 It facilitates effective audit trails i.e. the sequence of operations from the source to the
final stage can be monitored
 It‘s easy to operate as opposed to the manual system
 It leads to improved communication between the company and the investors hence
reducing delay in receiving dividends and rights issue
 It ensures data security

Disadvantages of the CDS account

 Computer literacy is a prerequisite to operate a CDS account

 Ignorance of the investors on the availability of the CDS accounts
 There are poor methods of information dissemination regarding the CDS account e.g.
statements to be obtained only upon application and payment of a fee.
 Lack of active government participation in investment activities

Challenges in the implementation of the CDS

There are a number of implementation challenges in the securities trading in Kenya. The
manifest challenges include

 Concerns on security; - investors are still unsure of the implications of rendering paper
certificates and rely exclusively on electronic certificates
 Concerns on confidentiality; - this relates to the inherent risk in information system.
Where other persons can access an investors personal details
 Dealing with cross listed securities particularly where stock exchanges in the other
markets are not as fully developed as the one in Kenya
 Lack of trust in the central depository agents

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CENTRAL DEPOSITORY AND SETTLEMENT CORPORATION (CDSC) LIMITED

The CDSC is a limited liability company that was incorporated on 23rd march 1999
under the company’s Act cap.486. It was authorized as well as regulated by the
capital markets Authority. It is incorporated to provide central depository services in
Kenya. The main objective of this corporation is to establish and oversee the working
of the CDS

Application for Appointment as a Central Depository Agent (CDA)

To apply for appointment as a Central Depository Agent (CDA), an applicant must submit their
application to the Chief Executive of the Central Depository. The application should be made
using Form 1, which is outlined in the First Schedule of the Procedures Manual. The application
must be accompanied by the following documents:

 Memorandum and Articles of Association: Or any other document that defines the
constitution of the applicant organization.
 Letter of No Objection: A letter from the relevant industry regulator (if applicable) and,
if the applicant is a member of a securities exchange, a letter of no objection from the
relevant securities exchange.
 Firm Profile: A detailed profile of the firm, including its experience and expertise in
relevant fields.
 Current Operating License: A copy of the applicant’s current license to operate (where
applicable).
 Statement of Ability to Provide Services: A statement from the directors of the
applicant affirming their ability to provide the required services, including sufficient
financial resources to meet obligations as set out in the Act, CMA rules, these rules, and
the Agency Agreement.
 Details of Key Personnel: Information about the key personnel of the applicant,
including their training, experience, and skills.
 Appointment Fee: The prescribed appointment fee as specified by the Authority.

Every applicant shall make appropriate arrangements with the settlement bank to effect payment
in accordance with these rules and the procedures set out in the Procedures Manual and authorize
the settlement bank to effect settlement in accordance with instructions received from the Central
Depository, and to disclose to

Appointment
Upon finding an applicant fit for appointment as CDA and the applicant satisfying the
requirements under rule 4, the Central Depository shall appoint the applicant as a CDA. The CDA
shall upon executing the Agency Agreement be duly appointed and entitled to commence
operations as such agent on the terms set out in the Agency Agreement.

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Without prejudice to the provisions of rule 4 any stockbroker, investment bank or dealer for the
time being duly licensed by the Authority and a Member of the securities exchange shall qualify
for appointment.

Any person aggrieved by a decision of the Central Depository not to appoint him as a CDA may
appeal to the Authority whose decision shall be final

Approved Functions of a Central Depository Agent (CDA)

A Central Depository Agent (CDA) is authorized by the Central Depository to perform any or all
of the following functions:

1. Collection and Submission of Certificates: Collecting certificates and submitting them

to the Central Depository for deposit, with the purpose of immobilizing securities.
2. Requests for Withdrawal of Certificates: Submitting requests to the Central Depository
for the withdrawal of certificates related to immobilized securities.
3. Management of Securities Accounts: Opening, maintaining, and closing securities
accounts for clients.
4. Allocation of Trades: Allocating trades to the appropriate securities accounts.
5. Collection of Fees and Charges: Collecting any fees or charges imposed by the Central
Depository, as specified under the relevant rules.
6. Other Ancillary Functions: Performing any other incidental and supporting functions as
determined by the Central Depository at its discretion.

Suspension or revocation
Any CDA may be suspended by the Central Depository or be revocation prohibited from
maintaining or performing any or all of the approved functions of a CDA in any of the following
circumstances: -
 violation, whether directly or indirectly, of any provisions of the Act, the CMA rules or
these rules notwithstanding the payment of any penalties or fines imposed thereon;
 failure to pay any money due and owing to the Central Depository or the securities
exchange on any account;
 failure to make good any indemnity for the benefit of the Central Depository pursuant to
rule 11 hereof;
 becoming insolvent under the Companies Act or any rules or regulations made
thereunder;
 where it is a statutory body established under or by any Act of Parliament, being declared
insolvent by the Government or being listed among entities to be dissolved or liquidated;
or
 Otherwise acts in a manner prejudicial to the interests of the depositors, the Central
Depository or the capital markets generally.

Operations and Maintenance of Central Depository Accounts

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Subject to Rule 22, Central Depository accounts shall consist of accounts held by all depositors,
including:

1. CDAs who are members of a securities exchange.

2. CDAs who are not members of a securities exchange.
3. Other depositors.

All Central Depository accounts must be opened through a Central Depository Agent (CDA),
unless the Central Depository specifies otherwise.

Accounts held by CDAs shall contain the following information where applicable:

 Name of the CDA

 Address of the CDA
 Country of incorporation or registration of the CDA
 PIN Number of the CDA
 The CDA‘s identity code
 The CDA‘s account number
 The CDA‘s banker‘s address and account number
 Names of securities deposited
 Securities codes
 Quantities and descriptions of securities held
 Amount of frozen securities due to trades, mortgages, court orders
 (where applicable)
 Type of account
 Any other information as the Central Depository may prescribe from time to time.

PROCESSING PERIOD

The processing period for an application to open a Central Depository account is an important
aspect that ensures the timely establishment of accounts for investors or other depositors. The
requirement that the Central Depository Agent (CDA) must process the application within one
(1) business day after the application date is aimed at providing efficiency and swift service to
clients, which is essential in the fast-paced environment of securities trading.

Points to discuss about this one-day processing rule:

Prompt Service Delivery

 Efficiency: The rule encourages CDAs to act promptly, ensuring that applicants (whether
individuals, companies, or other institutions) can quickly gain access to the Central
Depository System (CDS). In the context of securities trading, swift account opening is
crucial because delays can result in missed trading opportunities and a disruption in the
overall trading process.

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  Investor Confidence: By processing applications in a timely manner, CDAs contribute
to building trust and confidence among investors, as they feel assured that their requests
are being handled efficiently.

Grant of a licence

(1) The Authority may, in writing, subject to such conditions or restrictions as it may consider
proper to impose, license a company as a central depository, if it is not contrary to public interest
to do so and the Authority is satisfied that the company—

(a)has and maintains at all times, such minimum paid-up capital as may be prescribed by the
Authority from time to time;

(b)has a board of directors constituted in accordance with such criteria as the Authority may
prescribe;

(c)shall provide, as far as is reasonably practical, fair, transparent and efficient arrangements for
the deposit, registration and transfer of securities;

(d)shall manage any risks associated with its business and operations prudently;

(e)shall ensure the compliance of its rules by its agents;

Compliance and Regulatory Requirement

 This requirement ensures that CDAs adhere to a standardized timeframe set by the
regulatory authority (e.g., the Capital Markets Authority or CMA).
 It helps maintain consistency across different CDAs and prevents unnecessary delays that
might result from internal inefficiencies or bureaucratic hurdles.
 Regulatory Oversight: Such a rule also facilitates regulatory oversight, allowing the
Central Depository and the CMA to monitor and enforce compliance, ensuring that
CDAs are not engaging in unnecessary delays that could hinder market operations.

Impact on Market Liquidity and Trading

 Liquidity: Fast processing of account applications ensures that investors, including those
looking to buy or sell securities, can immediately participate in the market. This is vital
for maintaining market liquidity and ensuring that transactions are settled quickly.
 Real-Time Access: The one-business-day processing rule helps ensure that investors
have real-time access to their accounts for trading purposes. It allows for quicker
settlements and transfers of securities, which are fundamental aspects of market
efficiency.

Technological and Operational Requirements

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  To meet this one-business-day deadline, CDAs must have the necessary technological
infrastructure and operational processes in place. This includes automated systems for
processing applications, efficient customer service channels, and secure platforms for
handling sensitive investor information.
 Training: CDAs need to ensure that their staff are well-trained and capable of processing
applications quickly and accurately to meet the required timeframe.

Possible Challenges

 High Volume of Applications: During periods of increased market activity or new

public offerings, CDAs may face challenges in processing a high volume of applications
within the stipulated timeframe. This could strain resources and delay account opening
unless adequate planning and resources are allocated.
 Data Validation: Some applications may require further validation or additional
documents, which could pose a challenge in meeting the one-business-day requirement.
In such cases, CDAs must communicate efficiently with applicants to avoid delays.

STRUCTURE OF CENTRAL DEPOSITORY ACCOUNTS

Accounts and Records

 Every Central Depository Agent (CDA) must open and maintain one or more securities
accounts with the Central Depository. These accounts are used for recording the deposit
or withdrawal of securities and for handling transactions involving such securities. The
accounts include:
1. CDA's Securities Account
2. Client Securities Account
 When a CDA opens a client securities account, it must ensure that it has complete details
of the depositor's identity.

Types of Accounts

A client securities account and a CDA securities account may record eligible securities in the
following types of accounts, as per the operational procedures:

 Collateral Account: For securities pledged to the CDA and held by the Central
Depository, subject to the CDA's instructions only.
 Pledge Account: For securities pledged by one account holder to another or to any other
pledgee, and held by the Central Depository under the instructions of the pledgee.
 General Account: For eligible, unencumbered securities held either by the CDA or the
account holder, available for use.

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Operations

 Depository Service and Facilities: The Central Depository provides services and
facilities to CDAs in accordance with the Agency Agreement. Securities accounts can
only be maintained by depositors through a CDA.
 Instructions for Changes: Any instruction to change, update, or correct a client’s
securities account must be submitted by the CDA to the Central Depository, in line with
the operational procedures.

Processing of Deposits

 Acceptance of Securities: A CDA may only accept eligible securities for deposit with
the Central Depository. Securities can be deposited with a CDA after the notification
date.
 Verification: After receiving the deposit form and securities certificates, the Central
Depository will forward the certificate to the issuer for verification and confirmation
within one market day.
 Issuer Confirmation: The issuer must confirm the authenticity of the certificates and
verify the depositor’s signature within two market days, in line with operational
procedures.
 Account Credit: Once verified, the Central Depository credits the depositor’s account
with the securities.
 Fees: The Central Depository may charge a fee for depositing eligible securities, as
prescribed by the Authority, starting after the immobilization date.
 Deposit Information: Any deposit information must be delivered to the Central
Depository no later than 12 noon to be recorded the same day.

Functions of the Authority

The functions of the Authority under this Act shall be to; -

(a) such measures as are necessary to ensure that the provisions of this Act are complied with;
(b)take necessary measures to maintain and promote fairness, efficiency, competitiveness,
transparency and orderliness in the deposit of securities, and the clearance and settlement of
transactions in securities, by a central depository;
(c)licence, supervise, monitor and regulate the activities of central depositories;
(d)set standards of competence for central depository agents;
(e)approve the rules of central depositories;
(f)promote, encourage and enforce proper conduct, competence and integrity of central
depository agents;
(g)counter and suppress illegal, improper or unfair practices;
(h)make regulations for the better carrying out of the purposes and provisions of this Act; and

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(i)perform any other functions under this Act or any other legislation as may be conferred, from
time to time, on the Authority.

Amendment of CDS rules

(1) The rules of an approved central depository, in so far as they have been approved by the
Authority, shall not be amended, varied or rescinded without prior approval of the Authority.

(2) Where the board of directors of an approved central depository intends to amend its rules, it
shall forward the proposed amendments to the Authority for approval.

(3) The Authority shall, within thirty days of receipt of a notice under subsection (2), notify the
central depository of its decision regarding the proposed amendments, and where it does not
approve the same, shall specify the reason for such decision.

(4) A central depository which proposes to alter any particulars already furnished to the
Authority, or to make any change in its state as specified in its application under section 4, shall
seek the prior approval of the Authority.

Regulation of dealings in securities

(1) A central depository shall do all such things as are necessary to ensure orderly dealings in
immobilized or dematerialized securities.

(2) A central depository may, in performing its function under subsection (1), give to an issuer of
any security or a central depository agent direction to do a particular act or thing or to refrain
from doing a particular act or thing and the issuer or central depository agent shall comply with
such directions.

(3) An issuer or central depository agent who fails to comply with any direction given by a
central depository under subsection (2) commits an offence and shall, on conviction, be liable to
a fine not exceeding five million shillings, or to imprisonment for a term not exceeding five
years, or to both.

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