International Journal of Humanities and Social Science
Vol. 2 No. 20 [Special Issue – October 2012]
Regulating Kenya’s Securities Markets: An Assessment of the Capital Markets Authority’s Enforcement Jurisprudence
Dr. Jacob K. Gakeri
School of Law, University of Nairobi
Kenya Box 30197 Nairobi, 0010 GPO Kenya.
The importance of an optimal regulatory and enforcement matrix in enhancing securities markets cannot be overemphasized. Countries with deep and vibrant securities markets generally have effective regulatory and enforcement philosophies. This paper seeks to characterize the regulatory and enforcement paradigms of Kenya’s securities markets in the context of the global regulatory and enforcement philosophies. From the analysis, it is evident that the regulatory paradigm is indissolubly government or national with nominal self-regulation. Although the statutory framework enshrines self-regulation, the relevant provisions are ambiguous and remain ineffectual. The notion of self-regulation remains an illusion. The regulator enjoys plenary legislative and supervisory powers over market intermediaries and listed companies without being subject to meaningful accountability mechanisms. Amendments to the Capital Markets Act and its Regulations have consolidated the Capital Markets Authority’s position as a paramount regulator. Finally, the enforcement history of the Capital Markets Authority discloses no decipherable philosophy. Enforcement actions have been intermittent and reflect no imperatives.
This paper examines Kenya’s securities markets regulatory and enforcement paradigms and their impact on market development. Using the statutory mandate, influence of the executive, the Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) over the securities markets, it assesses whether the regulatory model is Government, self or a configuration of the two. Drawing from the tenures of different chief executives of the CMA, the paper illuminates how the agency has deployed its enforcement arsenal from 1990 to the present. In a nutshell, this paper answers the following questions. First, what is Kenya’s securities markets regulatory model? Second, what is the Capital Markers Authority’s enforcement philosophy and finally, how have the regulatory model and enforcement philosophy impacted on the development securities markets? Part One examines Kenya’s securities markets regulatory paradigm in the context of global regulatory approaches. From the discussion it is evident that regulatory structure is indissolubly Government-led. Although the statutory framework appears of propagate self regulation, the operative provisions lack clarity. Arguably, self regulation remains illusory. Part Two illuminates the Capital Markets Authority’s enforcement toolkit. The analysis demonstrates that the CMA enjoys a panorama of enforcement actions. Disconcertingly, most of them have never been invoked suspected infractions notwithstanding. Part Three attempts to characterize Kenya’s securities markets enforcement jurisprudence. Using enforcement actions taken by the Authority from 1990 to the present, the paper demonstrates that there has largely been no underlying philosophy. Enforcement intensity and diversity appears to vary with the chief executive. Most importantly, it has been intermittent, unmethodical, unstructured and unenthusiastic. The paper concludes that the enforcement jurisprudence is undecipherable. A. Securities markets regulatory strategies
According to the International Organization for Securities Commissions (IOSCO), the three interrelated and sometimes overlapping goals of securities regulation are:
• Protecting investors,
• Reducing systemic risk and
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Ensuring that markets are fair, efficient and transparent.1
However, the fundamental question remains...
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