East African regulators adopt risk-based market audits
A broker at the Nairobi Securities Exchange. Regional regulators agreed to conduct joint inspections to ensure compliance with the capital markets laws. PHOTO | FILE
What you need to know:
Regional capital market regulators under the East African Securities Regulatory Authorities (EASRA) have approved the adoption of risk-based supervision of capital markets.
Kenya is already implementing the system but the other regional countries have not.
Regional capital market regulators under the East African Securities Regulatory Authorities (EASRA) have approved the adoption of risk-based supervision of capital markets.
Risk-based system means inspections will be based on the size of the firms, systems in place, number of clients and capital.
Kenya is already implementing the system but the other regional countries have not.
In a press statement, Kenya’s Capital Markets Authority (CMA) said this was one of the issues EASRA had discussed to improve regional integration with a view to promoting the vibrancy of the capital markets.
“The consultative committee approved the fast-tracking of the adoption and implementation of risk-based supervision among all regulators in the region,” said the CMA.
“In order to ensure timely and efficient analysis of financial information, the regulators supported the adoption of systems for online submission of financial statements.”
The consultative committee meeting, held in Nairobi between July 6 and 8, also deliberated on supervisory colleges, industry certification, harmonisation of continuous disclosure requirements, regional capacity building programmes and introduction of book-building regulations in some member states.
Book building (form of share auction) has been practised in Kenya but is unknown in the other EAC countries.
“On initiatives to put in place book-building regulations, it was agreed that an appropriate balance be considered to ensure that the process supports both transparent exits and public offers of securities in the capital markets,” said the CMA.
The EASRA will also promote financial reporting awards in order to improve disclosure of information by listed entities.
“In order to enhance financial reporting and disclosure requirements across the region, the regulators will partner with other domestic stakeholders to continue promoting financial reporting awards and scale them up to the regional level,” said the CMA.
To reduce chances of arbitrage resulting from cross-border operations — taking advantage of differing capital market laws — the regulators in the region will conduct joint inspections.
The regulators also agreed to development a programme for crisis management for the capital markets to support systemic stability.
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