Editorials

EDITORIAL: CMA seizure of insider trading loot right move

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The CMA must be seen as willing and able to penalise wrongdoers in the stock market. FILE PHOTO | NMG

The move by the Capital Markets Authority (CMA) to seize Sh458 million gains from insider trading suspects seeking to benefit from the takeover of KenolKobil #ticker:KENO inspires confidence that the regulator indeed has teeth and can bite when it comes to dealing with those who flout market regulations.

Granted, the takeover of big companies is bound to attract unscrupulous market insiders seeking to exploit their access to information that is not already in the public domain. In the circumstances, the regulator ought to be on the lookout from the word go when they notice significant volumes of shares being traded or substantial price changes that cannot be directly associated with known fundamentals.

Many a time in the past, the CMA has been seen as unable to take decisive and prompt action where proper market conduct has been breached perhaps because of inability to nail the culprits with solid evidence. This time round, the CMA sought evidence including communication between those suspected of involvement and even retrieved hidden or encrypted information that has helped it build its case for punitive action.

Rules of engagement

This is as it should be in this age of advanced technology. It shows that regulators can leverage technology to enforce the rules of engagement that all players are expected to abide by. It also demonstrates that the days when suspects went scot-free because evidence was hard to gather have now become a thing of the past. It is good to put out the message to those involved that there is nowhere to hide once a market player has violated the rules.

Withholding of the cash that could have gone to suspects makes it clear that there will be financial consequences for those involved and illicit gains will not be available to those linked to irregular dealings. Besides freezing the accounts, the CMA has room for further actions against those found culpable in the form of withdrawal or suspension of business licences. Of course the suspects have also some recourse in terms of putting their case before the court of law if they believe that the action against them was not warranted or was unjust in the first instance.

At the end of the day the CMA must be seen as willing and able to penalise wrongdoers in the stock market while also giving the accused a fair hearing.