NAIROBI, October 14- The Capital Markets Authority (CMA) has maintained that the industry is well regulated despite the revelations of looming financial problems in several stockbrokerage firms.
CMA Chief Executive Officer Stella Kilonzo said they have continued to carry out inspections in the operations of the brokerage firms to ensure an orderly and efficient capital markets.
“We are also looking at overhauling our legal framework and moving towards risk-based supervision as we continue to oversee all the licensees in the market,” she insisted adding that they would continue to implement reforms to ensure a stringent and a well-run industry.
On Monday, the Authority appointed auditing firm KPMG to take over the management of Discount Securities Limited despite giving the firm a ‘clean bill of health’ five months ago.
She downplayed the financial woes in many stockbrokers and refused to comment on whether this action (on Discount Securities) did not point to the lack of a stringently regulatory environment.
“We issued a very comprehensive statement and I would like to leave it at that but I will give you more information later,” she told this reporter.
Ms Kilonzo added that the appointment of KPMG to manage Discount Securities, which is one of the largest retail brokerage firms in the country, would not send panic across the market since the company was not placed under statutory management.
“Why would it cause panic? If you do your work by reporting the correct position according to the press statement that we gave out then, there should be no cause for alarm,” she told reporters.
At the same time, Local Government Minister Musalia Mudavadi warned against taking the issue of having a strong regulatory environment in the financial sector lightly.
He cited the global financial crisis which has been blamed on the regulators’ laxity and added that the same should not be allowed to happen in the country noting that in case of an imminent collapse of companies, Kenya lacks the capacity to bail them out.
“Such a crisis does not come up over night, so we would like to urge the regulators not to sleep on the job. Let us make sure that we protect the investors and companies to the extent best possible,” he urged.
Mr Mudavadi added that the reforms in the capital markets should touch on the capitalisation levels of the financial intermediaries, the professional aspects of the people running the sector among other changes.
The two spoke after the launch of the CMA University Challenge, which is a competition targeting students with the aim of creating awareness and increase knowledge on the capital markets among the youth.
“The challenge will test the participants’ analytical, presentation, organisational and communication skills and their ability to apply their knowledge on the capital markets,” said CMA Chairman Prof Chege Waruingi.
He added that financial literacy was vital in economic development and could result in better consumer choices, a more dynamic market for financial services which could ultimately translate into higher levels of savings and reduced indebtedness.
He pointed that there is a need to design policies and strategies that would enhance the level of effective participation in the market.
“One of the ways that the Authority seeks to address this is through investor education and public awareness initiatives,” the Prof added.