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Capital Markets

Capital markets regulator vows to stop insider traders

Paul Muthaura
Capital Markets Authority (CMA) chief executive officer Paul Muthaura. FILE PHOTO | NMG 

The Capital Markets Authority (CMA) says it will focus on cheats at the Nairobi Securities Exchange (NSE) to strengthen the reputation of the country’s securities market and enhance accountability by participants.

CMA chief executive Paul Muthaura said this amid investigations into suspected insider trading in oil marketer KenolKobil’s #ticker:KENO shares. It also follows the release of findings of a separate probe where a former CBA Capital executive has been fined for engaging in insider trading in bonds between 2016 and 2017.

“With regard to the impact that (the probe) may have global trends very strongly show that markets respond to effective regulation,” said Mr Muthaura during the launch of a legal framework to support the issuance of green bonds in Nairobi.

“…(This) can only serve to strengthen market confidence and the potential for the longer-term for sustainable capital markets,” Mr Muthaura told Business Daily.

On Tuesday, CMA fined David Maena, formerly of CBA Capital, a total of Sh166.9 million after finding him guilty of dealing with privileged (non-public) information on bond trades, which he used to front-run the market and make dual trades to profit at the expense of other investors.

The financial penalty is twice the amount of benefit that Mr Maena received from the irregular trading in the fixed income securities that CMA said amounted to Sh83.4 million.

Insider trading robs investors who do not have nonpublic information of receiving the full value for their securities, experts warn.

“Insider trading misprices capital. hurting efficient economic development; reduces returns for the poor who have no access to inside knowledge; and hides illegal or criminal money behind a wall of inflated prices or deflated costs," said Deepak Dave, a risk management expert with Nairobi-based Riverside Capital in an earlier interview.

The CMA KenolKobil’s probe pertains to shares traded ahead of last year’s announcement of a Sh35 billion takeover of the company.

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