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Capital Markets

Activist launches legal fight over CMA board chairman

James Ndegwa
Mr James Ndegwa, the Capital Markets Authority (CMA) board chairman. PHOTO | SALATON NJAU | NMG 

An activist has filed a petition seeking the disbandment of the Capital Markets Authority (CMA) board, accusing its chairman, James Ndegwa, of conflict of interest.

In his suit papers, Okiya Omtatah has accused President Uhuru Kenyatta and the Treasury Secretary of handpicking the board members as opposed to subjecting them to a transparent, competitive and merit-based process.

According to Mr Omtatah, Mr Ndegwa has a conflict of interest to the “extent that he is a public official who regulates his private businesses”.

Mr Omtatah wants the court to declare “that the decision to handpick and appoint the chairperson and the independent members of the CMA board contrary to the law which requires that public office be filled through a transparent, competitive, inclusive and merit-based recruitment process open to public participation was irregular, unlawful and unconstitutional”.

Through a Kenya Gazette notice published on March 28, 2018, Mr Kenyatta reappointed Mr Ndegwa as chairperson of the markets regulator for a period of three years.

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Mr Omtatah claims Mr Ndegwa is conflicted for allegedly being chairman of First Chartered Securities (FCS), which owns ICEA Lion. ICEA Lion owns ICEA Lion Asset Managers, which manages the ICEA Money Market Fund, a body regulated by CMA.

Further, the activist said that ICEA Lion had recently acquired Stanlib, hence Stanlib Money Market Fund, which is also regulated by CMA.

He says that FCS owns a 12 percent stake in NCBA #ticker:NCBA, which is listed in the Nairobi Securities Exchange #NSE. NCBA, he alleges in the court documents, also runs the NCBA money market fund, which is also regulated by CMA.

“The conflict of interest is not innocent since under his stewardship, the CMA has enacted and enforced policies which are very friendly to banks and are very unfriendly to competing nonbank players,” he said.

Mr Omtatah said the policies include ensuring that banks are the only ones who can be trustees.

“Currently, the CMA works with trustees to ensure money market funds are only invested in banks. Hence, there is a public interest in ensuring that the holder of the office of the chairperson of the board of directors of the CMA is not a player in the regulated sector,” he says.

In the petition filed before the Constitutional Division of the High Court, Mr Omtatah said the Treasury Secretary handpicked and appointed the six board members without subjecting them to a merit-based recruitment process that was open to public participation.

“And for practical reasons, as currently composed, the chairperson and the independent members of the board are captive to vested interests, including to the point that they have literally become agents of banks,” he said.

According to him, the board was in the process of recruiting a new substantive CEO after the previous holder, Mr Paul Muthaura, declined to renew his contract for a second term.

“The appointment of the CEO who is likely to be in office for the next eight years is so substantive that it cannot be left to the conflicted board which is captive to a section of the Capital Markets,” he said.

Other than seeking a declaration that Mr Ndegwa is conflicted, Mr Omtatah wants the court to quash his appointment and that of the board and compel the government to appoint a new board “strictly in compliance with the Constitution and national legislation”.

The other board members are John Birech and Freshia Mugo-Waweru, who were appointed in June 2018, George Mose Moibi and Thomas Nzioki Kibua, who were appointed on December 21, 2018 and Peter Muigai and Christine Okoth, who were appointed on May 3, 2019.

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