90 financial analysts cleared as new agency moves to weed out fraudsters

Some 90 financial and investment analysts have so far been certified in fresh vetting under a new law meant to rein in quacks and protect investors’ wealth.

The Investment and Financial Analysts Act (2015) — which came into operation on December 8, 2015 — provides an 18-month window for those in the profession to apply for a practising certificate.

Those applying will be subjected to tough integrity tests to determine their suitability and must hold globally-recognised professional credentials such as the Chartered Financial Analyst (CFA). 

The Institute of Certified Investment and Financial Analysts (Icifa) created by the new law said the 90 so far certified work as securities, research and equity analysts, portfolio managers or investment advisers.

“We will also issue practising certificate annually to registered members provided they accumulate enough continuous professional development (CPDs) over and above passing an ethics examinations test (Fit and Proper) test offered by the institute,” said Icifa chairman George Wakah in an interview with the Business Daily.

The new financial analysts’ body comes at a time there have been a growing number of questions on the quality and objectivity of research and advisory notes – with allegations that some offer coverage on companies in total disregard of fundamentals.

For example, analysts at AIB Capital and Cytonn differed sharply in their January coverage note on National Bank of Kenya.

AIB Capital marked National Bank as having the best capital gain opportunity among listed lenders, valuing the counter at Sh26.40 per unit, compared to current trading price of Sh15 per share.

Cytonn Investments, however, valued National Bank’s stock at Sh16.10 apiece, near the Friday’s average close.

READ: Analysts split on Housing Finance, National Bank correct share valuation

Those convicted of bribery and fraud, as well as those named in corruption reports cannot be licensed to work as financial analysts, the new law says.

Dr Wakah added that apart from CFA, the other qualifications recognised under the law include the Certified International Investment Analyst and two local programmes namely Certified Investment and Financial Analysts and Certified Securities and Investment Analysts offered by Kenya Accountants and Secretaries National Examinations Board (Kasneb).

Regulated trades

The new regulator becomes Kenya’s 20th professional society and elevates investments and financial analysts to join the league of regulated trades such as engineering, pharmacy, medicine, public health, nursing, law, architecture and quantity surveying.

The effect of this legislation is that those currently working in the financial industry without proper qualifications will have to go back to class if they are to continue serving as analysts, advisers and managers.

“No person shall practice as a certified investment and financial analyst unless the person is registered as a certified investment and financial analyst and holds a practising certificate or an annual licence,” reads the Investment and Financial Analysts Act.

Those found guilty of serving as financial analysts without a licence face a Sh500,000 fine and two-year jail term for first-time offenders while repeat offenders will be hit with a Sh1 million fine and a public reprimand in the Kenya Gazette and newspapers, according to the new statute.

Icifa is also empowered to take disciplinary action against rogue financial analysts found in breach of fiduciary duty.