Regulating Kenya’s securities markets: an assessment of the capital markets

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? 1 IOSCO, Objectives and Principles of Securities Regulation, available at www.iosco.org/librarypubdocs/pdf/IOSCOD323.pdf.(visited on Oct. 20, 2010).