The capital markets regulator has showed great steel in pursuing and penalising former directors of motor dealer CMC Holdings.
The CMC board members and top management who were involved in siphoning of the company’s cash and stashing it in an offshore account showed serious affront on the trust bestowed on them by shareholders of the company.
It will go down as one of the darkest chapters in Kenya’s capital market history, which threatened to tear down investors’ confidence in the stock exchange.
The Capital Markets Authority (CMA) action sets an exemplary precedent that will act as a strong deterrent to current and future board members of public listed companies.
The confidence of investors in Nairobi Securities Exchange (NSE) listed firms and other CMA regulated entities will be greatly inspired by the regulator’s action.
In going after the former CMC directors, who included former powerful head of public service Jeremiah Kiereini, the CMA has proved that it has teeth which can indeed bite even the mighty.
The investigation, which has taken many years and involved even external consultants, has been painstaking. That did not stop the former directors from making a robust push against the regulator.
That they were found guilty of the offences laid against them also proves that the CMA can oversee credible investigations against market breaches.
The CMC case should lay a firm foundation for the CMA to act against other market breaches. Going by recent complaints by minority investors in recent and ongoing takeover transactions, the regulator clearly has its work cut out.
The minority investors feel that they have been handed the short end of the stick when majority owners are allowed to set takeover prices of their companies.
The suspension of shares of takeover companies from trading has not helped, as it has locked out the investors from liquidating their investment and also denied them the right to realize their market-determined price.
There are also complaints of minority investors feeling that they do not have a voice on boards of listed firms. The regulator could start by urgently reviewing and implementing new regulations to strengthen protection of minority investors.
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