NAIROBI, Kenya, Jun 19 – The government has called on the stock broking fraternity to enforce harsh penalties on any of their rogue members.
Finance Minister Uhuru Kenyatta said on Friday that bad governance practises by some players had contributed to the lack of integrity and confidence in the industry, which has in turn affected the performance of the capital markets.
“As your experience has shown, bad (governance) practices of a few of your members can deal a devastating blow to the whole industry. It does not pay to play along. You must therefore police yourself and there must be sanctions for those who do not play by the rules,” the minister emphasised in a speech read on his behalf by Financial Secretary Mutua Kilaka.
Although he was quick to assure them that the government does not blame them for the problems in the capital markets, he pointed to their failure to meet prudential requirements and misuse of clients’ money as some of the serious challenges that need to be urgently dealt with.
He called on all stakeholders to work together and restore good governance in the market and expressed the government’s commitment towards this cause.
Mr Kenyatta underscored the importance of the stock broking business in the country’s economic growth and the development of the capital markets, he pointed to the big role they played during the Safaricom Initial Public Offer which is the largest transaction in Kenya’s history.
From this offering and many others, Mr Kenyatta observed that their contributions helped the government in not only mobilising financial resources but expanding public awareness in the capital markets.
The minister spoke during the Kenya Association of Stockbrokers and Investment Banks (KASIB) seminar on corporate governance training. KASIB Acting Chairman Michael Gichohi said the one-day workshop which was targeted at senior executives in brokerage and investment banks aims to among other things encourage the upholding of good business conduct.
He reported that members have embraced the call to institute changes at all levels of their establishments in order to make them more investor-friendly.
While admitting that this confidence had taken a bashing over the last one year, Mr Gichohi pointed to the upsurge of investors into the Nairobi Stock Exchange (NSE) which brought with it numerous challenges for market intermediaries.
“As the members of KASIB were working out modalities to strengthen their internal structures, activity in the stock market took a downturn last year, seriously denting investor confidence,” the chairman defended the association even as many maintain that the governance issue is largely to blame for the problems being faced in the sector.
A raft of measures, including investor education and a code of conduct for stock brokers and investment banks, he disclosed have been unveiled to help address these problems.
Mr Gichohi reiterated their keenness to work with the Capital Markets Authority (CMA) in laying a strong foundation for the growth of the market. Towards this end, he said, KASIB and CMA are in consultations to roll out strategies to spur growth and stabilise the capital markets.
“We welcome and encourages regulations because it is the only way through which we shall realise structured growth in this budding industry,” the chairman remarked.