What Happens When a Stockbroker Fails? Inside the CMA’s Investor Compensation Fund
- The Kenya Investor Compensation Fund compensates investors for financial losses caused by licensed stockbroker failures.
- The Fund is established under the Capital Markets Act and serves as a consumer protection mechanism.
- Compensation is capped at KSh 200,000 for eligible claims, which may not cover larger investors' losses.
While the Investor Compensation Fund provides essential protection for investors against intermediary failures, its limitations, such as the compensation cap and exclusion of market risk, highlight the need for investors to conduct thorough due diligence before engaging with stockbrokers. This underscores the importance of understanding the nature of investment risks and the role of regulatory frameworks in safeguarding investor interests.
