Capital Markets Authority reigns in on rogue firms

By James Anyanzwa

NAIROBI, KENYA: The Capital Markets Authority (CMA) cracks whip on errant investment banks, stockbrokers, fund managers and listed firms as the regulator moves to instill discipline in the operations of the local securities market.

The authority’s show of mighty came in the fore after it slapped a Sh7 million fine on Faida Investment Bank for over-drawing clients’ account and failing to maintain proper records in breach of the laid-down regulations.

The crimes, which were committed at the height of the market’s boom in 2007, also include failure by the investment bank to avail books and records, which the firm is required to maintain and absence of bank reconciliation records for all its ten (10) bank accounts for the period from April to September 2008.

According to the authority’s latest annual report (2012), the financial penalty imposed on Faida Investment Bank in 2008 and 2010 accumulatively stood at Sh13.58 million, but the institution got a reprieve after the punishment was later reduced to Sh7 million on March 13, 2012.

The regulator, which is also seeking more powers to discipline listed firms that have retained over-age directors fined East Africa Portland Cement Company (EAPCC) a total of Sh200,000 for its boardroom wars, which saw the trading of its shares suspended for 60 days at the Nairobi Securities Exchange (NSE).

“ We shall be looking at the actions to be taken against companies and shareholders who are still retaining over-aged directors. These guys are being retained by major shareholders,” Chairman Kung’u Gatabaki told The Standard on Saturday.

EAPCC was fined Sh50,000 for failing to disclose changes in its board to CMA, Sh50,000 for suspending some of its directors without informing the regulator and a further Sh100,000 for issuing public announcement on the same without CMA’s approval.

CMA also fined lCentum Sh50,000 for failure to issue profit warning after its earnings fell by more than 25 per cent last year. Apex Africa Investment Bank was reprimanded for unauthorised sale of clients’ shares, while Sterling Capital was penalised Sh50,000 for a similar offence.

Dry Associates was handed a Sh1 million penalty for failing to maintain a risk management system and proper internal controls, which led to loss of investors’ funds in the Crown Berger commercial paper programme.

Crown Berger were ordered to settle the principal amount totaling Sh30.81 million due to investors, as the firm failed to reconcile its registers with those of Dry Associates.

Other firms that were either reprimanded or had their shares suspended for contravening CMA regulations include CMC Holdings Ltd, Cannon Asset Managers Ltd, Mabati Rolling Mills, Wellman Group, Lions Capital Ltd, Kenya Airways Employee Share Ownership Scheme (ESOP), Kakuzi Ltd and Amana Capital Ltd.

CMA reckons that fraud is an area of concern for the financial sector due to its potential impact on market’s confidence. Data from CMA shows that reported fraud cases rose by 18 per cent to 460 in 2011 from 390 in 2010.


 

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