Business Daily (Nairobi)
13 April 2008
editorial
Nairobi — For nearly one month now, investors who held accounts with collapsed Nyaga Stockbrokers have been queuing outside the company's Nairobi head offices to establish the whereabouts of their money.
This exercise, which is being managed by the statutory managers appointed by the Capital Markets Authority and the Nairobi Stock Exchange, has largely involved helping the investors open new accounts with other brokerage companies.
The statutory managers have also helped thousands of investors transfer their accounts to other brokers - in an exercise that is expected to continue for months to come.
But even as this goes on, the question that remains unanswered in the Nyaga saga is what is being done to rein in the perpetrators of irregularities that led to collapse of the broker.
Last week, Central Bank Governor Prof. Njuguna Ndung'u made an important distinction of what underlines the now frequent troubles of Kenya's stockbroking community.
There are governance issues that basically relate to the composition of the boards of these companies that are the custodians of hundreds of billions of investor funds as well as the qualifications of those who manage them.
And there are problems that are criminal in nature that fall directly in the ambit of crime officials and cannot be blamed on the quality of surveillance or lack of it within the subsector.
Recent ongoings at Nyaga Stocks has left many investors wondering why law enforcement agencies such as the anti-fraud wing of the Kenya Police or even the Kenya Anti Corruption Commission are missing in action.
It has not been lost on this group of observers that corporate crime of this nature is not unique to Kenya but has happened even in the more advanced economies such as the United States.
What sets countries apart therefore is how authorities deal with crime of this nature and what remedies are offered to victims of the crime. On this front, the United States gave a good account of its commitment dealing with corporate crime in the wake of collapse of energy giant Enron and telecoms company Worldcom.
Through a combination of sheer manipulation of financial reports and insider trading top executives of these firms succeeded in pushing up their share prices in the stock market.
When the bubble finally burst, millions of ordinary Americans, including retirees, were left paupers to survive on state handouts and non-governmental relief.
Most importantly, collapse of these companies did bring into disrepute capitalism -an economic model that is centred on free enterprise that the United States has been promoting globally.
In tackling the crisis, the US authorities took extra-ordinary measures, some of which were clearly aimed at sending a clear message to corporate criminals that there is a huge price to pay for their actions.
As regulatory authorities dealt with the corporate governance issues, America's crime officials swung into action shocking the world with pictures of handcuffed executives being led into the courts to answer for their crime.
The courts also took queue with expeditious trials and the handing down of lengthy prison sentences to these heartless corporate criminals reclaiming a sizeable fraction of the ordinary Americans' faith in capitalism.
In Kenya, the authorities have showed no such commitment to dealing with corporate crime despite the fact that Nyaga is only the second stockbroker to go down for reasons that are criminal in nature and in as many years.
Instead, investors are being treated to high dose of stonewalling and cartel behaviour from a stockbroking fraternity that only appears to be interested in a grand cover-up.
This is despite the fact that failure to act only harms attempts by the same club of business people to promote the stock market as a viable investment channel for ordinary Kenyans.
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