Newly appointed Capital Markets Authority (CMA) chairman James Ndegwa Thursday said he will not resign as chairman of listed NIC Bank to avert conflict of interest as demanded by critics.
Instead, the publicity-shy chairman said he will opt not to participate in any deliberations on companies he has interests in.
Mr Ndegwa told the Business Daily that CMA had structures regulating how to deal with any potential conflict of interest.
Market watchers have pointed out that there is a potential conflict of interest for Mr Ndegwa because he has interests in the NIC Bank, which also owns stock market intermediaries, including NIC Capital and NIC Securities.
“If there is anything about the companies I have an interest in, then I would allow the board to discuss it without me being involved. I would not be present in such board meetings,” said Mr Ndegwa.
Mr Ndegwa spoke on the sidelines of a capital markets exhibition and conference at the KICC. The event has been held every year since 2013.
The question of conflict of interest is not new at the CMA with the late stockbroker Edward Ntalami having controversially been appointed to the same position.
The question is even more pertinent now because NIC Capital was in 2014 a subject of regulatory action by the CMA.
NIC Capital was accused of having a capital deficit contrary to the licensing requirements of the Capital Markets (General) Regulations. Though the amount of the deficit was not revealed, the company was asked to redress the situation not later than May 30 last year.
“The authority issued the directive that NIC Capital submit to the authority three monthly reports providing a clear update of the actions taken and the actual progress to be submitted on March 31, April 30 and May 30, 2014,” ordered the CMA.
Former CMA chairman Kung’u Gatabaki recently said the potential of conflict of interest remained high for Mr Ndegwa. The former CMA chair said though there is no law stopping the regulator’s chairman from being a director in a listed company, it was good practice to avoid the situation.
“Based on good corporate governance, one must resign as a director of publicly traded companies upon becoming a regulator. In my case, I resigned from Mumias, TPS Eastern Africa where I held directorships when I became the chairman of CMA,” Mr Gatabaki said.
Others seen as having possible conflict of interest following recent appointments by President Uhuru Kenyatta are TransCentury managing director Gachao Kiuna and Standard Bank director of investment banking in East Africa John Ngumi.
Dr Kiuna was appointed to the board of the Kenya Investment Authority (KenInvest) while Mr Ngumi was appointed chairman Kenya Pipeline Company (KPC).
The Standard Bank has been playing a significant role in financing Kenya’s multibillion-shilling energy sector projects, including KPC.
Mr Ngumi was appointed as chair of the Konza Technopolis Development Authority (KOTDA) in 2012 due to his experience in raising project finance for companies. In the case of KPC, the discovery of oil would mean there is a likelihood of building a new oil pipeline and for Mr Ngumi, the question would be whether Standard Bank would want to participate in a deal on the pipeline.
“I have been a chairman of KOTDA for the past two-and-a-half years and such a question (of conflict of interest) has never arisen. The CfC Stanbic compliance department has very clear and strict rules on this,” Mr Ngumi said in response to the question of conflict of interest.
“I would remove myself from any matter that has a potential conflict of interest with my bank,” he said.