Two brokers, investment bank fail CMA audit test

By James Anyanzwa

The Capital Markets Authority (CMA) has finally completed the 2009 licensing process for market intermediaries by serving two stockbrokers and an investment bank with extended conditional licenses.

The market regulator has also suspended two investment advisors and revoked the trading permit of a fund management firm.

The announcement brings to an end an era of anxieties that had occupied the capital markets and the investing fraternity.

In a Kenya Gazette Notice No.4557, the CMA extended the 2008 operating licences for Ngenye Kariuki and Company Ltd, Reliable Securities Ltd and Suntra Investment Bank until June 30 for failing to satisfy its licensing requirements.

Investment advisors whose licences were also extended include Emerging Africa Capital Ltd, Equilibrium Capital Ltd and WSD Capital (K) Ltd.

Mrs Stella Kilonzo, the authority’s chief executive said the affected firms would be expected to iron out outstanding issues with the regulator within the stipulated two- months period before review of their licensing status.

"The Authority believes the issues resulting in the extensions of their 2008 Licenses can be fully addressed within the given period," said Kilonzo.

Trading permit revoked

The authority, however, suspended investment advisors, Franklin Management Consultants Ltd and Inter-Alliance International (K) Ltd from trading and revoked the trading permit for Old Mutual Asset Managers (E.A) Ltd. Kilonzo said suspended firms would not conduct business of an investment adviser until the ban is lifted. She said the Kenya Association of Stock Brokers and Investment Banks (KASIB) will form an industry committee to come up with modalities of ensuring the firms whose 2008 licenses had been extended attain 2009 licenses at earliest opportunity.

But in a dramatic turn of events, Kilonzo said the authority plans to phase off the annual licensing regime to pave way for the risk-based supervision system, which emphasizes on identification of emerging risks and assessing the adequacy of each intermediaries risk management systems on a continuous basis.

New licensing system

Critics, however, argue that the licensing rule has helped put intermediaries on high alert and its elimination would encourage laxity.

"CMA is considering doing away with annual licensing as it embraces risk based supervision," reckoned Kilonzo.

The five-month licensing review process started in December last year and ended in April 2009.

Kilonzo said during this period, the authority undertook reviews of the various market players in order to satisfy itself that they met the licensing requirements provided for in the Capital Market Act and regulation before renewing licenses.

The authority also approved the annual licenses of institutions such as the Nairobi Stock Exchange, Central Depositories and Settlement Corporation Limited, Global Credit Rating Company and Acacia Fund Limited, Authorised Depositories, Collective Investment Schemes and Employee Share Ownership Plans.