Changes herald faster trading of bonds

Trading of Treasury bonds is set to become more efficient once new regulations proposing to merge electronic storage of shares and fixed income securities are passed into law.

The Central Bank of Kenya currently operates the system for electronic storage of Treasury bonds.

Finance minister Njeru Githae proposed in yesterday’s budget speech that a single central depository will be set up to store both government securities and shares.

“International best practice points to a single and efficient securities infrastructure for both fixed income and equity securities. I propose to amend the Central Depositories Act to include government securities as part of eligible security for purposes of clearing and settlement,” said Mr Githae.

Commenting on the minister’s proposals, financial services firm PwC said the change will spur sale of treasury bonds.

“This will encourage uptake of its debt securities by individuals, in a year where it intends to significantly finance the Sh250 billion budget deficit through public borrowing,” said PwC.
The minister also proposed laws to tighten corporate governance.

Mr Githae proposed to give the Capital Markets Authority (CMA) additional powers through a special gazette.

The new rules will enhance CMA’s role as an investigator, sharing of information with peer regulators and its function as a determiner on who is fit and proper to hold positions in capital market intermediaries.

The special Capital Markets Authority (Amendment) Bill 2012 supplement proposes to give the regulator powers to set fitness test for operators in the capital markets.

The amendment says that the law will take into account whether a director or employee has broken any law both in Kenya or elsewhere which was designed to protect investors from loss arising from theft, fraud or malpractice.

The amendment will also lock out employees or directors who have run or is running a businesses that has failed or is about to go down.

“Was a director of a licensed person who has been liquidated or is under liquidation or statutory management,” says the amendment.

Candidates will however have the chance to plead their case.

“The Authority shall give a person an opportunity to be heard before determining whether a person is fit and proper for the purposes of this Act,” says the amendment.

The amendment has also delegated powers to investigate in case the authority feels that a person or company has contravened the Act.