Capital Markets

Attorney General fights Ndegwa ouster at CMA

The Attorney-General has defended the appointment of James Ndegwa as the chairman of Capital Markets Authority (CMA) in a court case filed by activist Okiya Omtatah seeking his removal over alleged conflict of interest.

Mr Omtatah argues that Mr Ndegwa’s position at the regulatory agency is in conflict with his family’s diverse interest in regulated businesses including banking, fund management and publicly-traded firms.

The AG, who is also a member of CMA’s board, avoided addressing the alleged conflict of interest in his reply that highlighted the President’s prerogative in making appointments.

Besides Mr Ndegwa, the activist wants CMA’s other board members, including John Birech, Freshia Waweru, George Moibi, Thomas Kibua, Christine Okoth and Peter Mungai to be ousted.

In the case before the Employment and Labour Relations Court, the office of the AG Kihara Kariuki said that the President handpicked the CMA board members to ensure there was no vacuum at the agency.

He noted that in considering temporary and remedial appointments, the Head of State does not take into account competitive recruitment and can handpick people to State corporations so long as it is not unconstitutional.

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

“The appointments were done in great national and public interest for a specific time in order to ensure continuity of the institution and that there would be no vacuum in the Capital Markets Authority board,” reads the grounds of opposition filed by the AG.

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

Since Mr Ndegwa’s appointment in April 2015, businesses in which his family has an interest have initiated or completed several mergers and acquisitions that were approved by the regulator.

These include last year’s merger between the former NIC Group and CBA Group that created the Nairobi Securities Exchange-listed NCBA Group, the country’s third-largest bank by assets.


The Ndegwas own a stake of about 12 percent in the merged company, having previously held shares in both NIC and CBA.

The family in 2018 also backed Delaware-based conglomerate Seaboard’s failed bid to delist Unga Group #ticker:UNGA from the NSE.

The Ndegwas own a controlling 50.9 percent stake in the miller but this was not enough to push Seaboard to the 75 percent threshold as some minority investors refused to sell to the multinational at the Sh40 per share offer price.

NAS Holdings, in which the family is a shareholder, had also offloaded the troubled Ennsvalley Bakery business to Unga Group for Sh535 million in two transactions between 2016 and 2017.

Former CMA’s chief executive Paul Muthaura, who oversaw the Ndegwas’ transactions, recently left the regulator to join ICEA Lion General Insurance (another company partly owned by the family) as the chief operating officer.

Mr Ndegwa, whose term was extended by President Uhuru Kenyatta in March 2018, has previously said that he avoids conflict of interest by not participating in CMA deliberations involving companies in which he has an interest.

Mr Ndegwa had replaced Kung’u Gatabaki, who remains the most outspoken person to chair the regulatory agency, with his tenure characterised by aggressive enforcement actions and public scolding of major market participants including stockbrokers.

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

“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,” Mr Omtatah said.

“For example, the conflicted board has ensured that banks are the only ones who can be trustees and it is very unfriendly to competing non-banks.”

Besides the President’s right to pick CMA’s board members, the AG further sought to have the case dropped on the basis that the petition has been overtaken by events since a judicial review should be filed within six months after an event.

The AG also noted that a similar case by the same petitioner is being heard in the Court of Appeal whose decision will impact the premise of the present case.

“The Court of Appeal being a court of superior jurisdiction is already seized of the matter raising similar questions and it is only proper that this honourable court down its tools through a stay order to await the outcome of the pending Court of Appeal judgment,” the AG’s office said.

The contest has eclipsed the process of appointing a new CEO to lead the regulatory agency. Mr Muthaura was replaced in an acting capacity by Wycliffe Shamiah.