The Departmental Committee on Finance and National Planning in the National Assembly chaired by Homabay County MP, Hon. Gladys Wanga met with the Cabinet Secretary,National Treasury, Central Bank (CBK) Governor and the Chief Executive Officer, Capital Markets Authority (CMA)to receive responses to questions by Hon. Members and a statement by Hon. Aden Duale over concerns raised on the efficiency of CMA in regulating the capital market industry. The questions and the statement arose in the wake of the continued loss of investments by innocent Kenyans at the expense of CMA’s watch.
The Capital Markets Authority is mandated to develop and regulate Capital Markets in Kenya. CMA facilitates the raising of long-term capital for deployment to productive enterprises to support economic growth and transformation. It is further charged with enabling the recipients of capital and the providers of capital to engage. In this process, CMA is expected to maintain an orderly, fair, efficient and transparent market for the purpose of protecting the investors.
The Capital Markets Authority (CMA) has in the recent past been put on the spot over the loss of public funds to botched investments.
The former Leader of the Majority Party, Hon. Duale accused the markets regulator of failing in its principal role leading to recent investment failures and the proliferation of unregulated and illegal investment funds.
He cited the plight of investors in the Cytonn High Yield Solutions (CYHS) fund by Cytonn Investment, as highlighted by Cytonn CEO, Edwin Dande during a recent handover.
On their part, Cytonn Investments Ltd has vilified Capital Markets Authority (CMA) for blaming Kenya’s judicial system for “frustrating” their mandate.
Appearing before the Hon. Wanga led Committee, CMA CEO Wyckliffe Shamiah said the courts were getting in the way of their work.
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“Investigations have been done by us and even the Directorate of Criminal Investigations (DCI). However, I have an order, which says you can’t take any action on Cytonn”, he complained.
Shamiah claimed that the courts have reversed actions the authority has taken, adding that they need protection.
However, according to Dande, Shamiah was taking the legislators for a ride and was wrong for taking the populist route of blaming the courts. Dande castigated the authority’s head for issuing “illegal directives” and when taken to court, declining to show up to defend himself.
“Some agencies want to operate like we are still in the Kanu era… You can’t suggest anything. You can’t question anything. No due process. It’s like Article 47 is suspended,” complained Dande.
The Committee was also informed that the Attorney-General has blocked the Central Bank of Kenya (CBK) from revealing or tabling in Parliament findings of a forensic audit on the collapse of Imperial Bank.
CBK Governor , Patrick Njoroge and Treasury Cabinet Secretary, Ukur Yatani said the State could not share findings or summaries of the report with the National Assembly as required under Article 125 of the Constitution.
Dr Njoroge said there are several cases related to the forensic audit that are before the courts and further work by investigating agencies was progressing.
“The Attorney-General advised that, in the circumstances, sharing at this stage the findings and summaries of the forensic audit would undermine investigations and prejudice successful prosecution and defence of the ongoing cases. The overriding objective is to guard against prejudicing the course of investigations,” he said.Imperial Bank, which is under Kenya Deposit Insurance Corporation receivership, collapsed on October 13, 2015”, he submitted
He did not disclose the amount paid to the Financial Technologies International (FTI) after Alego Usonga MP, Samuel Atandi demanded to know why CBK still pays the auditor. He said CBK does not pay FTIs fees.
“This FTI consulting is still in CBK payroll and receiving billions of shillings from 2015. The governor is hiding something. Tell us how much money this company is being paid monthly or has been paid,” said Hon.Atandi.
This includes Ksh.2 billion in loses by Imperial bank bondholders after the bank’s collapse in 2006 and Ksh.4.8 billion in lost bond investments in the grounded Chase Bank.
In his statement, Hon Duale further cited Ksh.4 billion lost commercial papers in the now defunct retailer Nakumatt even as he cast doubts on the status of Cytonn’s High Yield Solutions fund.
The Garissa Township representative wants the CMA to disclose the total number of unregulated capital market products in the country including the number of investors affected and the role of the regulator in the proliferation of illegal investment funds.
Further, Hon. Duale wants the effectiveness and efficiency of the CMA established and the total number of firms penalized in last five years including remedial actions issued by the regulator listed.
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