It appears that the Kenya Association of Stockbrokers and Investment Banks (KASIB) is displeased at new regulations proposed by the Capital Markets Authority (CMA). An article in the Standard states that this is somehow damaging to the authority to the CMA.
Granted, if stockbrokers have been bouncing cheques and refusing to pay their fees, it makes the CMA seem weak and ineffective. However, for KASIB to complain that the new regulations are “not friendly” is a canard.
Greater regulation is absolutely necessary. Let’s just remind ourselves: we are one of the most corrupt nations on the planet, and our stock market, while vibrant, is still relatively young. Going into an economic downturn, if adequate regulation is not in place and is not enforced, innocent investors stand to lose all of their assets. If that happens, the loss in confidence in the stock market that we have already seen will only get worse. This is turn will make hopes of a recovery in the future more remote.
Naturally, KASIB members want to go about their business with as few constraints on their activities as possible. Capital requirements and penalties for bad behaviour seem like petty considerations, and damp down profits. However, we only need to look at the post-Enron scandals on Wall Street to see how dangerous light-touch regulation can be.
Hopefully, the CMA will recover from it’s wobbles since the shock resignation of Chege Waruingi and hold its ground. KASIB members will simply have to suck up the new regime and learn how to play within the rules. The future of the stock market will be healthier for it.
[Image by TimmyGunz]