Listed firms face tougher scrutiny under proposed law

Stockbrokers, investment banks, fund managers and other market players have been warned to be prepared for tougher regulations — including vetting of directors and senior managers.

Capital Markets Authority (CMA) chairman Kung’u Gatabaki Wednesday said the proposed changes in regulations was part of the authority’s plan to overhaul its supervisory role to meet demands of a market seeking better protection for investors’ funds.

The CMA is studying how firms are run and is working with Strathmore University and the Kenya Institute for Corporate Governance to overhaul the structures of listed firms.

Senior management and board of directors will have to undergo training in corporate governance and be vetted on whether they are fit to run the firms.

“We expect this process to involve acceptable forms of vetting of directors and chief executives of listed companies to ensure proper compliance with good corporate governance,” said Mr Gatabaki (left) during the CIC Insurance Group listing.

CIC Insurance chief executive Nelson Kuria said that the firm’s management ought to be automatically cleared since they have met CMA’s proposed requirements on corporate governance.

“All management and senior staff have gone through corporate governance training,” said Mr Kuria.

CIC became the sixtieth firm to list at the Nairobi Securities Exchange after listing by introduction Wednesday.

The CMA is introducing new laws to allow products such as Real Estate Investment Trusts (Reits), which make a case for additional powers for the regulator, said Mr Gatabaki.

Market players have said that Reits will have a symbiotic effect of making it easier for small investors to participate in the buoyant real estate market while developers will have access to a generous source of capital when funds from this tier of investors are pooled.

Introduction of a futures market and the Growth Enterprise Market Segment are other products in the pipeline.

CMA’s proposal for a bigger oversight role will add to gains that the regulator has already made in attaining a larger role. Finance minister Njeru Githae gave it additional powers through a special gazette in June.

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

(Read: Board wars turn focus on CMA’s oversight on listed firms)

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.