Regulator must ensure market accountability

The world financial markets are undergoing rapid revolution as far as transparency and accountability go. This has been foisted on the global stage by the financial and economic crisis which has hounded major economies since 2008.

Inevitably, the giant players in the international arena have been suspected of playing a major role in bringing the world to the precarious state it is in.

On Thursday, Barclays Plc was ordered to pay a penalty of $453 million to US and British regulators over manipulation of the key London Interbank Offered Rate (Libor).

The alleged breach by the UK bank, the majority owner of the Nairobi Stock Exchange-listed Barclays Bank, is said to have occurred between 2005 and 2009.

The upshot of the said manipulation which is expected to net more global banks involved in determination of Libor—used by many borrowers to benchmark their borrowing and lending rates—is that customers borrowed at low rates and that the bank hid its real cost of funds.

Our concern here is not just that transnationals are capable of such malpractices in well-regulated markets, leave alone poorly policed ones like ours.

It is that our own Capital Markets Authority (CMA) seems to take its mandate lightly even as it opposes calls for a single-stop regulatory authority.

Besides the series of violations that have seen brokers collapse and shake confidence in the capital markets, CMA appears to be supporting dominant market players as opposed to public investors.

The regulator has just announced that it has penalised Centum, a listed investment firm, for failure to issue a profit alert according to its rules.

Centum says it failed to do so as its investment portfolio did not render itself to accurate forecast, a defence which CMA has dismissed. The regulator has subsequently fined the firm what it says is an amount not exceeding Sh1 million.

We find fault with failure to announce the exact fine. In the US and UK case, the fine is not only substantial but clearly stated. Besides a serious impact on the offender’s finances, it sends clear signals to those with similar intentions.

We hope CMA is not hiding the true amount because it is ridiculously low. It is an insult to investors when the true fine is only known to the reported offender and bureaucrats at Embankment Plaza.

We urge CMA to lead the way in enforcing market accountability and clearly specify penalties and other enforceable sanctions.