Kenya’s markets regulator goes after rogue stock brokers

Kenya’s markets watchdog, Capital Markets Authority (CMA) has announced stringent plans it believes will go along way in taming runaway ‘mischief’ in the industry now taken over by rogue individuals with insider information in the manipulation of stocks business.

Some of the initiatives the authority is pondering over include investing in high-tech ICT innovations to help curb such cases.

the new measure comes barely months following increased regulation for online trading late last year which is expected to attract individuals and financial institutions who are keen to comply with the new set of standards by Capital Markets Authority (CMA).

Online Forex trading hasn’t been a very effective safe haven for most investors, but online trading bulls now say the new laws this year may ultimately end up as the Forex trading’s best friend.

The move, according to Eugene Abungana, a Forex Trading strategist with Meta Capital and a director at Nairobi School of Forex, will lure more players into the industry, which has been operating without proper guidelines and regulations for online traders and investors who use online trading platforms both locally and abroad to trade on their own.

“With the new regulations now in place, I expect to see more players join the party. The new guidelines by CMA this year will also help trigger trust and faith to those willing to venture into online trading,” said Abungana in an interview with Financial Fortune Media, during the first online FOREX trading conference held recently in Nairobi, adding that new rules and regulations by CMA will now guarantee investor safety, deep pocketed financial institutions who were previously hesitant to trade in the business.

EGM Securities (formerly Execution Point Limited) became the first Non-Dealing Online Forex Broker to be licensed and regulated by CMA – the government agency charged with licensing and regulating the capital markets.

The new set of rules by CMA include risk management policies that are expected to give investor the exact outlook of how risky an investment is, while at the same time leveraging a set at 1:100, the ratio of money set aside from the total investment aimed at cushioning the investor from losses. The regulations also include the registration of online foreign exchange dealers.

Available industry data suggest that there are currently more than 80,000 investors trading online, 80 per cent of whom are based in the UK with the rest spread out in Mauritius and Australia. Shares are traded online through both local and international brokers who are members of the over the counter (OTC) Forex market that they trade in.

The financial markets’ regulator had in October this year warned Kenyans against online foreign exchange trading through unlicensed entities, saying such trading activities could expose them to loss of investment.