NAIROBI, Kenya, Mar 9 – The Capital Markets Authority (CMA) has vowed to crack the whip on fraudulent practices at the capital market, following a rise in breach of regulations by players.
CMA Chairman Micah Cheserem said on Tuesday that cases of abuse of customer accounts, market manipulation tactics and poor accounting standards by stockbrokers and fund managers had dented the credibility of the capital markets.
“The capital market has had a long history of fraudulent activities going on that needs to be dealt with immediately,” Mr Cheserem said.
Insider trading is something Mr Cheserem said the authority had not dealt with expansively because they lacked the proper tools to investigate such cases.
“We cannot tell how rampant insider trading currently is but we suspect it must be taking place. The CMA is however going to be more vigilant in identifying to what extent it goes,” he said.
According to CMA Chief Executive Stella Kilonzo, the authority has a surveillance system that monitors the trades, client accounts and access to the central depository system but she said this remained inadequate.
“We are actually in the process of acquiring a surveillance system that has better functionalities that will help us in the fight against insider trading,” Mrs Kilonzo said.
In an effort of deterring flouting of rules, CMA is seeking to work closely with the Kenya Association of Stockbrokers and Investments Banks (KASIB) to flag firms with histories of fraudulent activities by entering them into a database shared by market players.
This, it is hoped, will lock out flimsy stockbrokerage companies and save investor funds.
“Those few who break the laws and rules of the market will be sanctioned promptly. The majority of the market players are honest people why should we allow a few to derail us?” Mr Cheserem questioned.
They were speaking during a corporate governance workshop for stockbrokers and fund managers.
President Mwai Kibaki has in the past called for strict adherence to regulations in the capital markets in an effort of attracting and maintaining investor confidence.
The bourse has been on an upward trend, but converse of insider trading and the suspension of firms has triggered a confidence crisis in the market.
The placement of Ngenye Kariuki stockbrokers under statutory management bolstered the CMA’s fight on rogue brokers. Discount Securities, Nyagah Stock Brokers and Francis Thuo are among the firms that have collapsed losing close to Sh2.5 billion in investor funds.
The CMA has systematically been enforcing requirements such as capping of individual ownership to 25 percent, separating ownership from management and seeking the authority’s permission to change top management, as measures to enhance good governance of the bourse.