Markets authority to name and shame rogue firms, traders

The Capital Markets Authority (CMA) will from July publicly name and shame rogue companies and individuals who breach listing rules.

Authority chief executive officer Paul Muthaura said the regulator plans to disclose disciplinary action to be taken against firms or persons engaging in professional misconduct such as breach of fiduciary duty, fraud and insider trading.

The agency has hitherto been opaque on actions taken on rogue firms, stockbrokers, and persons; only releasing such information in its annual report, which is published nearly 12 months after close of the fiscal year.

“We are looking at making information on enforcement action available on our website so that enquiries are noted as and when they occur. It takes long for our annual report to come out,” said Mr Muthaura in an interview.

“Likely from July/August, once we get the board sign-off, we will implement this,” he added.

Mr Muthaura said the new transparency requirements will help rein in rogue players as listed companies and professionals are keen to protect their brand and reputation.

Public rebuke of those breaking capital market rules will also provide investors with the information they need to make informed decisions.

The CMA last month fined National Bank of Kenya an undisclosed amount of money for failure to publicly issue a profit warning ahead of announcing a surprise Sh1.15 billion loss for the period ended December 2015.

Key announcements such as profit alerts and change in senior management positions must be published in at least two daily newspapers of national reach as well as made available to the securities exchange for dissemination to the market within 24 hours of the event.

CMA’s annual report for the year ended June 2015 shows that the regulator dealt with a number of cases of companies and individuals flouting market rules.

For example, CMA fined Standard Investment Bank Sh758,858 for facilitating one Henry Ngati Nugi to inflate the share price of Kenya Orchards over a three-month period in 2014.

CMA has also cited Faida, SBG Securities and Dyer and Blair for operating weak online share trading facilities that lacked internal controls to identify and prevent suspect orders.

It accuses the brokers of being party to “a price manipulative scheme which interfered with market price formation and fair trading process”.

Advisors at NIC Capital and Kingdom Securities were also in hot soup for “negligently” advising loss-making real estate firm Home Afrika to market its ill-fated bond as a partially secured bond yet it was not, and varying the coupon rate to 17 per cent from the approved 13.5 per cent.

A regulatory reprimand was issued to Tsavo Securities for “knowingly misrepresenting the existence of a counterparty for a sale by back transaction” for bonds worth Sh200 million in the “full knowledge” that the deal was against the law.

In the report, EBI Investment Corporation Kenya was cautioned for failing to publish full-year results in at least two daily newspapers of national circulation, according to the annual report.

Cash-strapped retailer Uchumi was made to publish a public apology in the newspapers for late payment of dividends declared for the year ended June 2014, the regulator said.

Troubled Mumias Sugar was cautioned for late submissions of its half year results and “failure to ensure the financial statements were accurate and provided a true and fair view of the position of the company”.