Why CMA does not need additional powers

The Capital Markets Authority’s quest for greater enforcement powers to police directors of companies listed on the Nairobi Securities Exchange is absolutely wrong in theory and totally off the mark in practice.

Theft, fraud, bribery and wrongful conversion of third party assets, including money, are already covered by Kenya’s various criminal and penal codes.

These “high crimes and misdemeanours” require effective police action with swift prosecution by the State of individuals alleged to have committed these crimes.

The criminal code of this country covers everyone in Kenya including directors of privately held companies, directors of companies listed on the NSE, lawyers, doctors, house wives ad infinitum to include corporate entities.

Nowhere are stupidity or ignorance listed as criminal offences.

The CMA claims that “good corporate governance” as it has defined this concept is essential to protect minority shareholders and to “restore” confidence in Kenya’s capital market which is narrowly defined as being the NSE!

The CMA already has the discretion to suspend trading in shares of listed companies on the basis of protecting the future prospects of the country’s capital markets by enforcing its corporate governance regulations.

The CMA should exercise its existing legal powers to suspend trading in shares of any NSE listed company operating without a complete board of directors, where shares are seldom nor ever traded because fighting directors and/or shareholders threw away 60- year- old international franchises, where accident reports and the findings of international investigations are kept from public view.

The logical outcome of giving the CMA greater enforcement power where “standards of corporate governance” have allegedly been breached will be the complete lockdown of the NSE and even more reasons for companies not to list on the NSE.

When directors of companies violate their fiduciary duties, aggrieved shareholders can instigate civil actions to recover losses and limit damages but this can only be workable when Kenya has a functioning judicial system operating within a modern and comprehensive legal framework.

Everyone benefits by having an effective judicial system and the CMA would not require special enforcement privileges.

Although Fiduciary duty as a legal concept in civil or commercial law is not written in stone, there are recognised legal standards.
Franklin is the Managing Director, Franklin Management Consultants Ltd