Delays: CMA sending wrong signals

By Peter Okongo

The Capital Markets Authority (CMA) was created by an Act of Parliament to promote, regulate and facilitate the development of an orderly, fair and efficient capital markets.

Whether the market regulator is up to this task is a key question lingering in the minds of many stakeholders at the Nairobi Stock Exchange.

The growing mountains of unresolved cases between market players in which the authority arbitrated are sending wrong signals about the regulators’ capacity to promote an efficient and vibrant market. "Justice delayed, justice denied" is an ancient legal maxim. Its impact has been profound, especially when it touches on issues on wealth or investments.

The increased caseloads like in the case of shareholders of Carbacid Investments and BOC Gases, which are yet to smile more than three years after CMA suspended shares of the two firms from trading are some of the issues that the have dented the image of the Nairobi Stock Exchange as it struggles to win back investors. CMA is also yet to give its verdict on the collapsed Nyagah Stockbrokers, Discount Securities and the latest on its cards is a dispute involving Equity Bank and Central Depository and Settlement Corporation (CDSC).

It’s against this worrying trend that one is prompted to ask: What has the CMA done to expedite justice? By that, we mean how long does it take for the regulator to render an opinion after parties involved have presented their arguments?

Phrased otherwise, who else should investors petition to so as to have their cases fast-tracked. Although blame is always put elsewhere, the market that is smarting from a serious investor confidence remains vulnerable as indicated by the sharp fall in index, which dropped by over 50 per cent.

Procrastination by the CMA in determining cases not only erodes the regulators integrity, but also puts at risk huge investments made by investors in the stock market. The fact that shareholders of Carbacid and BOC Gases are yet to start trading their shares attests to this.

While, investors have frequently complained bitterly about lost opportunities in share trading fuelled by conflicts between market players and the CMA, the regulator is yet to take up measures to shorten its settlement process. More than one month ago Equity Bank and CDSC fell off over a Sh47 million that the bank collected during the Safaricom initial public offering (IPO) last year.

While the dispute was destined to be finalised within two weeks, the authority claimed last week that the matter was still under mediation.

The move has helped fuel fears in the market given that Equity Bank controls more than 50 per cent of the total CDS accounts in the stock market.

While we applaud CMA for setting up a fraud investigation unit, the regulator must move fast to settle pending matters to restore confidence among investors.