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The Nairobi Stock Exchange: Still a Pit of Vipers

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What’s this in the Daily Nation? It appears a bunch of brokers at the Nairobi Stock Exchange (NSE) are bitching and moaning about the onerous regulations under which they are being forced to operate. It could cause the market to fall again, they say. They weren’t consulted properly, they whine. It’s all just sooo hard!

What could possibly have caused all this angst? Are brokerage CEOs being forced to disclose their full medical histories before being allowed to take up their posts? Has it been decreed that they have to wear hotpants and go-go boots to work every Friday? It must be something serious to get Michael Gichohi, chairman of the Kenya Association of Stockbrokers and Investment Bankers away from his lunch and in front of a microphone.

The burden that the erstwhile Masters of the Universe are being forced to bear is shocking: they are expected to release their half-year results to June 30 2009 to the public! Can you imagine such an imposition? It’s almost as though the CMA is taking its job as a regulator seriously.

Gichohi appears to have a very short memory. Investor confidence in the market was already on the skids before the global financial crisis hit; unscrupulous stockbrokers were playing fast and loose with other people’s money, treating the NSE as their own personal fiefdom and behaving in a mannner more appropriate for a backstreet gambling den than a national stock market. After the high-profile failures of the last couple of years, regulation is not a punishment for those players who remain: it is a necessity.

If confidence is to return to the market, investors need to be sure that those they are entrusting with their money are being properly regulated and operating within the letter and spirit of the law. Yes, the market may fall when investors see how big a hit certain companies have taken, but this will not be for the long term. In fact,  short fall in the market could actually be useful, in that it would set a baseline from which recovery could begin.

It is telling that those brokerages associated with banks do not see a problem with releasing their results, as banks already have harsher reporting obligations. Instead, it is th standalone brokerage, the majority of whom are owner-managed, that chafe against the new regulations the most. What do they have to hide? And which of them will be most embarassed when they hve to publish their results in the national press?

There will be no return to the boom times of a stock market on an ever-upward trajectory until the bad habits and chicanery of unethical brokers have been exposed and eliminated. One would think that market players would want to get their houses in order as quickly as possibly. From the hissing and squirming coming from KASIB, however, it appears that our financial snakes in the grass fear the coming of the mongoose of oversight.

[Image by ElDiabloSledge]

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