Analysts watchdog to punish dealers named by CMA

The watchdog of financial and investment analysts says it has opened an inquiry into the conduct of dealers working at investment banks and stockbrokerages penalised by the Capital Markets Authority (CMA) for engaging in questionable trading and unethical practices.

The Institute of Certified Investment and Financial Analysts (Icifa) says individual stockbrokers and advisers at Faida Investment Bank, Standard Investment Bank, SBG Securities, and Dyer and Blair — who allegedly aided clients to engage in price manipulation — face tough disciplinary action.

The professional body is also going after analysts and investment advisers at NIC Capital, Kingdom Securities and Sterling Capital, who were fingered by CMA as having misrepresented information to clients in pursuit of business interests.

Those found guilty of professional misconduct could be slapped with a Sh1 million fine, have their practising certificates withdrawn and publicly reprimanded in the Kenya Gazette and newspapers, according to the Investment and Financial Analysts Act (2015).

“We will discipline members as individuals, because CMA regulates and punishes the institutions,” said the institute’s chairman, George Wakah.

“Those found culpable will be locked out of practice,” Dr Wakah told the Business Daily.

In the case of the traders and advisers who are not members of the professional body, Dr Wakah said, they would be nailed when they present themselves to undergo a ‘fit and proper’ integrity test ahead of a mandatory licensing deadline of June 2017.

The regulatory body last week said it has so far licensed a total of 90 financial analysts working as securities analysts, research analysts, equity analysts, portfolio managers or investment advisers.

Icifa is governed by a council comprising 11 members including a chairman, one representative each from CMA, Kenya Accountants and Secretaries National Examinations Board, the Treasury, Nairobi Securities Exchange and six others elected by members.

The CMA says in its latest statement that it has fined Standard Investment Bank Sh758,858 for facilitating one Henry Ngati Nugi to inflate the share price of Kenya Orchards over a three-month period in 2014.

READ: CMA punishes brokers for illicit trading at NSE

The regulator says SIB effected and thereby “facilitated numerous transactions in the Central Depository System account of an Investor who was selling Kenya Orchards shares and leading to price increases contrary to the provisions of the Capital Markets Act”.

CMA has cited Faida, SBG Securities and Dyer and Blair for operating weak online share trading facilities that lacked internal controls to identify, flag and prevent suspect orders.

The capital markets regulator accuses the brokers of being party to “a price manipulative scheme, which interfered with market price formation and fair trading process whereby client transaction instructions were input without any or sufficient oversight”. 

The newly enacted Investment and Financial Analysts Act demands that professionals in the trade observe apply high “professional, technical, ethical standards” in the course of duty.

Advisers at NIC Capital and Kingdom Securities were accused of ‘negligently’ advising listed real estate developer Home Afrika to market its ill-fated bond as a partially-secured bond that it was not, and varying the coupon rate to 17 per cent from the approved 13.5 per cent.

Consequently, CMA ordered Home Afrika to refund investors all the cash it had raised in the doomed bond offer.