CMA warns of tough actions ahead

July 23, 2012
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Under the Capital Markets Act, the CMA can impose financial penalties, for breach of regulations and non-compliance, to the maximum limits of Sh5 million for individuals and Sh10 million for corporate entities/FILE

, NAIROBI, Kenya, Jul 23 – The Capital Markets Authority (CMA) will soon take a tougher stance in imposing penalties to ensure best practice of corporate governance.

CMA acting Chief Executive Officer (CEO) Paul Muthaura said by the end of this year, the regulator will begin enforcing key provisions of its corporate governance guidelines following gazettement.

“We are working on moving some of the key provisions into enforceable obligations under our continuing obligations on public companies, as opposed to merely having them in guidelines, to make sure we can address the concerns over penalties versus compliance out of desire,” he said.

Muthaura was speaking on the sidelines of the Regional Corporate Governance and Disclosure Conference that drew regulators from the region and senior experts from the United States Securities and Exchange Commission to discuss best practices in the development and regulation of transparent capital markets.

Under the Capital Markets Act, the CMA can impose financial penalties, for breach of regulations and non-compliance, to the maximum limits of Sh5 million for individuals and Sh10 million for corporate entities.

“Earlier initiatives to promote high standards of corporate governance in the region were made through guidelines, which lacked penalty provisions. The lack of enforceability of corporate governance guidelines has left regulators reconsidering their earlier stance,” CEO CMA Uganda Japheth Katto said during the forum.

The CMA has been accused of being too lax in its supervision of the market, or too punitive with some of its penalties to rein in rogue capital market industry players.

The issue of regulating capital markets has been a sensitive one, considering the sagas involving East African Portland Cement and CMC Motors, where the distinction between ownership and management capacity have been blurred.

“With different companies you have different structures and corporate focuses. So how they come into compliance with the guidelines may vary from company to company. We are trying to streamline the expectations on compliance to make sure everyone understands what is expected irrespective of the nature of their company,” Muthaura explained.

In efforts to scale up its oversight role, the CMA launched an advanced market surveillance system, last month, to ensure real time surveillance.

This would enable the regulator to identify and curb any trading irregularities in good time and gather further evidence for prosecution in cases of breach of Capital Markets Acts and Regulations.

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