CMA seeks proposals on instilling integrity

The public has 30 days left to submit proposals to the State financial regulator, the Capital Markets Authority (CMA), on how to safeguard market integrity.

Earlier in the week, the CMA through an advert in the newspapers gave notice for recommendations on its plans to create laws that will enable it give the Nairobi Stock Exchange (NSE) powers to self regulate.

This would free the CMA from the exercise by delegating authority to the NSE, which is better placed to police trading activity given the closeness between investors and the bourse.

The CMA has published draft proposals meant to give powers to the NSE which will make the NSE a self regulatory organisation (SRO).

The NSE will be able to regulate the operations of its members and the users of its services.

Once the proposals become law, the CMA will delegate some regulatory powers to the NSE, helping the CMA concentrate on regulating the NSE.

“The bill has to be read and we will be educating legislators on the various aspects,” said CMA chief executive Stella Kilonzo.

Private company

The NSE which is a private company owned by brokers is unable to self-regulate because it has not been conferred these powers by the Capital Markets Act, the law which governs players in the financial sector.

Inefficiency arises as a result of lack of laws that power the NSE since every time incidents occur, the CMA and the NSE run parallel operations to solve problems, according to communications and market development manager, Samuel Njoroge.

For the process to happen, the NSE has to be turned into a public company also known as demutualisation, a process that CMA chief executive says has to be done rapidly.

Stock brokers would cede ownership of the bourse from 80 per cent and would be left with 25 per cent.

Other powers that will be granted to the CMA should the draft bill be passed into law include the powers to discipline members.

The NSE would also be required to present audited quarterly financial statements that match international standards.

The work of the CMA would then be check how well the NSE is self-regulating.

The CMA’s move is meant to curb rogue trading that has resulted in some brokerages going under and dragging investors savings with them such as the defunct Nyaga Stock Brokers.

To date the CMA is only left with Sh20 million to complete compensating victims of the broker’s collapse.

The CMA chief executive was speaking when the regulator received the ISO: 9001 certification.

Bob Karina of Faida Investment Bank declined to comment on the issue pending a tentative meeting by the Kenya Association of Stock Brokers and Investment Banks scheduled for Friday.

March 5 is the deadline to submit proposals to the CMA on the NSE becoming a self regulation organization and on demutualisation.