Uhuru cracks whip on capital markets

February 19, 2009
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, NAIROBI, Kenya, Feb 19 – The government has finally moved in to restore confidence by announcing a shake-up of the institutions running Kenya’s capital markets.

Finance Minister Uhuru Kenyatta said the process would begin with the immediate reconstitution of the Capital Markets Authority (CMA) Board, to be followed by those of the Nairobi Stock Exchange and the Central Depository and Settlement Corporation (CDSC).

“The old board will stay in place until we have picked new members,” Mr Kenyatta clarified.

The Finance Minister’s announcement comes in the wake of damning allegations over malpractice by brokers that resulted in the collapse of two investment firms and the loss of huge sums of money by investors.

“What we are doing is ensuring that we have the necessary regulatory framework to protect investors in our capital markets and to ensure that there is full confidence both by Kenyan and foreign investors,” he said.

Mr Kenyatta said the new CMA board would be required to work with the Authority’s management to review its internal and organisational structure, to ensure that it is properly aligned to the CMA strategic vision.

At the same time, Mr Kenyatta said a forensic report prepared by PriceWaterhouseCoopers on the collapsed Nyaga Stock Brokers had been forwarded to both the Attorney General and the Police Commissioner for further investigations and prosecution.

He further announced that the CMA, Central Bank and the CDSC would work together to create a central depository system to allow for transactions on government bonds and shares through a single account.

Mr Kenyatta also recommended the strengthening of the Investor Compensation Fund along the same lines as the Deposit Protection Fund Board for commercial banks.

He reassured that the Authority would also make arrangements and modalities for compensating investors who had lost their investment through fraud starting with the small investor.

“What the government is trying to do is just to move towards strengthening that confidence and showing that we have a strong capital markets with the necessary regulatory framework to both give a return while  at the same time protecting investors who so choose to invest in the Kenya capital markets,” he said.

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