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Capital Markets

CMA anti-fraud unit recovers Sh25 million investor funds

Photo/File  Capital Markets Authority chief executive, Stella Kilonzo. The CMA stepped up market surveillance following the collapse of four stockbrokers in quick succession, which was attributed mainly to lax enforcement of rules.
Photo/File Capital Markets Authority chief executive, Stella Kilonzo. The CMA stepped up market surveillance following the collapse of four stockbrokers in quick succession, which was attributed mainly to lax enforcement of rules. 

The capital markets regulator recovered Sh25.4 million of investors’ funds last year, as anti-fraud police seconded to the state body stepped up surveillance of trading at the bourse.

The amount was Sh18 million more than the Sh7.5 million recovered in the financial year ended June 2010, said the Capital Markets Authority (CMA) in its newly released annual report for 2011.

“The recoveries represent monies paid to clients or values of shares reinstated,” said the market watchdog.

The number of policemen seconded to the CMA’s Capital Markets Fraud Investigation Unit (CMFIU) increased by five to 11 officers in the period, boosting the regulator’s ability to handle fraud cases.

The report said that the unit had continued to fast-track cases within the securities industry, restore confidence, identify fraud risk areas and recommend preventive measures to the authority.

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Overall the CMA saw the number of cases fraud and economic crimes in the capital market reported increase by 18 per cent to 460 compared to the previous year.

While some categories of cases dropped in the year to June 2011, others went up, resulting in an overall rise in the reported cases.

“The unit is also committed to effective investigation and prosecution of persons who commit fraud within the securities market,” said the report.

The number of cases forwarded to the director of public prosecutions rose to seven from three in the previous year, while active investigations rose by 23 to 347 cases by last June.

The cases for enforcement within the market rose to 17 from 13 while those cases withdrawn (after having been reported) rose to 40 from 12 in the previous year.

The pending arrests as at June 2011 were 19 compared to two the previous year, while cases pending before the courts dropped to 30 from 36 in the previous year.

The regulator set up the CMFIU in May 2009 and staffed it with officers from the Criminal Investigations Department specialising in economic and cyber crime.

In the same year, CMA adopted investor education as a key mandate in its strategic plan.

“The authority therefore undertook a study on the effectiveness of the current investor education strategies. The findings and recommendations of this study will inform the development of a new investor education strategy in the coming year,” said the regulator’s report.

The CMA stepped up market surveillance following the collapse of four stockbrokers in quick succession, which was attributed mainly to lax enforcement of rules.

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