Major crisis at Capital Markets Authority as chairman, directors, exit

From left: Privatisation Commission Board Member Mugambi Nandi, Investment Secretary Esther Koimett and Kung’u Gatabaki during a stakeholders’ workshop in Nairobi. [Photo: Courtesy]

By James Anyanzwa

Kenya: A major crisis looms at the Capital Markets Authority (CMA), following the exit of four directors including Chairman Kung’u Gatabaki. Among the four, one resigned while three others opted out after their contracts were not extended. 

This has consigned the CMA board to a leadership vacuum, making it difficult for the market regulator to make key decisions.  Gatabaki, who was appointed by former President Mwai Kibaki, will be forced to step down on this Friday after three years at the helm of the regulator.

Power vacuum

It is understood that the Jubilee government has declined to renew his tenure but it is yet to name the successor, portending a serious power vacuum at the securities market regulator. “I’m leaving CMA because my contract has not been extended,” Gatabaki told The Standard yesterday,” adding that, “The Government has not agreed to extend the mandate of the board.”

The National Treasury has also suspended the appointment of a substantive CMA chief executive. This is as government moves to create a consolidated financial sector regulator, that will bring together CMA, Insurance Regulatory Authority and Retirement Benefits Authority. The move is part of the parastatal reforms proposed by the Presidential Task force on Parastatal Reforms (PTPR) last year. PTPR seeks to consolidate multiple regulators to deepen growth and development of the financial sector.

 CMA has operated with acting Chief Executive Paul Muthaura, who is the authority’s director-in-charge of regulatory policy and strategy, for close to two years. The position fell vacant after the exit of Stella Kilonzo, whose four-year term ended on June 30, 2012, but chose not to renew her contract.

Gatabaki replaced Micah Cheserem who resigned on January 11, 2011 as chairman of the CMA to join the Commission for Revenue Allocation. At the time of his appointment Gatabaki promised to maintain the momentum for change that was by then sweeping across the markets. Having resigned as chairman of Housing Finance in 2010, Gatabaki said enhanced corporate governance in the capital markets was critical in bolstering investor confidence and market integrity.

National Treasury Cabinet Secretary Henry Rotich said his ministry is already receiving proposals on how the new consolidated financial sector regulator would work. PTPR task force wants all chief executives of the State agencies merged to form a Government Owned Entity where heads of their directorates will be only allowed to serve for their unexpired term for six months.