New rules to curb malpractices on the Nairobi bourse
Traders on the floor of the Nairobi Securities Exchange. PHOTO | FILE
What you need to know:
Under the new regulations published in the Kenya Gazette dated May 13, the joint shareholding of stockbrokers on the Nairobi Securities Exchange will not be allowed to exceed 40 per cent while individuals and private companies will not own more than 5 per cent stake in the bourse.
A public company seeking to purchase shares in the bourse will cap its shareholding to not more than 10 per cent.
Kenya has introduced new rules to ensure proper running of its stockmarket, which has in the recent past suffered loss of investor confidence due to poor corporate governance.
Under the new regulations published in the Kenya Gazette dated May 13, the joint shareholding of stockbrokers on the Nairobi Securities Exchange will not be allowed to exceed 40 per cent while individuals and private companies will not own more than 5 per cent stake in the bourse.
A public company seeking to purchase shares in the bourse will cap its shareholding to not more than 10 per cent.
The new regulations, however, contain provisions for exemptions in cases where an individual, private company or public company applies to the Capital Markets Authority for exclusion.
Exemptions
According to CMA’s chief executive, Paul Muthaura, exemptions to such rules may be granted if large shareholding in the bourse is in the public interest and will deepen the market.
“In situations where we shall have a strategic investor looking to take an ownership stake and bring in new technology and connectivity and if we are satisfied that the large ownership is in the interest of the public and will support the deepening of the market then we shall grant exemptions,” Mr Muthaura told The EastAfrican.
Shareholders whose ownership exceeds the stated limits are required to comply within six months from the time the new regulations came into force on May 13.
The new rules, however, did not spell out the penalties for non-compliance.
As at December 31 last year, 12 stockbrokers owned 32.4 per cent of NSE while National Treasury and Capital Markets Authority’s Investor Compensation Fund each owned a 3.37 per cent stake, according to NSE’s Annual Report of 2015.
NSE was formerly owned by stockbrokers and investment bankers who were also traders, creating a conflict of interest in how the bourse was being run. As a result, between 2007 and 2010, four stockbrokers went under with investors’ money due to trading malpractices and poor corporate governance.
