Allow me to start by recognizing the presence of distinguished delegates from;

         Capital Markets & Securities Authority of Tanzania

         Representatives from CBK

         Representatives from financial sector regulators SASRA, IRA

         Nairobi Securities Exchange,

         Unclaimed Financial Assets Authority (UFAA)

         Financial Reporting Centre (FRC)

         Market intermediary representatives,

I would like to note special appreciation to all our facilitators for the next two days who will undoubtedly add a great deal of colour and flavor the topic.

It is my pleasure to extend a warm welcome to all of you for this important seminar to engage on pertinent issues facing our capital markets today.

The subject of fraud knows no borders and has an undeniable impact of slowing the deepening of investments in the greater economy and in the capital market in equal measure. But we appreciated that even as we tackle the topic of fraud we need to strengthen understanding of the issues related to wider risk management and the increasing compliance obligations in our globalized markets. We are therefore very grateful to our colleagues from the Unclaimed Financial Assets Authority, the Financial Reporting Centre, the Capital Markets Fraud Investigation Unit and PwC for joining us over the next two days.

As a sector, the capital markets have been far from immune from the ravages of fraud schemes affecting publicly-traded companies, benchmark manipulation, issuers of corporate bonds and even the government bond markets. These failures have served to reinforce some of the doubts seen in local and global markets following the global financial crises with regard to the overall integrity of global capital markets.

In this context, we must be conscious that the avenues to tackle fraud and risk cannot be limited to only revisions of the law and regulations but goes to the fundamental perception of risk and the operation and internal structures put in place to influence culture and behavior.

In line with the aspirations of the 10 year Capital Markets Master Plan, the Authority has been pleased to see robust industry initiatives to diversify the available capital market products to include Real Estate Investment Trusts (REITS); the introduction of derivatives is on the horizon and with the support of the principle-based approach to rule making we will soon see Exchange Traded Funds (ETFs) in operation.

But the introduction of these new products comes with risks, which need to be appreciated and addressed.

In this technological era, we have seen improved access to the capital markets, but also potential increased vulnerabilities of market players and investors to fraud and deceit. Financial crimes such as market manipulation, money laundering, cybercrime, creative accounting and other financial statements fraud benefit just as much from technology unfortunately.

In an increasingly interconnected world further issues that confront us in the capital markets are money laundering and terrorism financing that have potentially devastating economic, security and social consequences locally and globally.

Success in fighting money laundering calls for increased effectiveness in tackling the predicate offenses that generate the proceeds to be laundered through the financial and other economic sectors. In this context, the predicate offenses often fall well beyond the jurisdiction of the Authority or other financial sector regulators represented here including drug and human trafficking, corruption, tax evasion, poaching, piracy among others. Nonetheless the adverse consequences of money laundering translate to reputational, operational, legal and concentration risks for the financial sector.

In this context, the Government has shown a high level of political commitment in overseeing the stability of the country’s financial sector through overseeing the implementation of requisite laws and measures which are benchmarked against international best practices and the recommendations of the Financial Action Task Force (FATF) the global standard setter for AML/CFT standards. 

At a sector regulatory level the Authority has taken a number of steps to tackle areas which have featured prominently in order to protect the integrity of our markets;

        Adoption of a risk based supervision approach in 2009, improving the capital market’s regulations

        Strengthening Corporate governance for issuers and intermediaries, including the role of independent directors on an issuer’s corporate Board, the protection   of minority shareholders, the importance of independent audit committees, and mechanisms to protect against conflicts of interest presented by related-party transactions;

      Assessing Internal and external Auditors audit standards, including auditors’ independence and the effectiveness of audit standards and oversight, and requirements for auditor rotation;

       Broadening Issuer disclosure requirements, including management’s discussion and analysis of material events and factors likely to have an impact on the issuer;

       Tightening Bond market regulation and transparency, including the types of financial disclosures required of bond issuers and the transparency of bond market price-setting mechanisms;

      Strengthening the conduct and governance obligations of market intermediaries, through adequate controls and procedures and to ensure that material non-public information they acquire about an issuer is not misused; and

        The introduction of strict liability for insider trading.

The purpose of this seminar is to provide a forum for the entities involved in the capital markets sector in the region to brainstorm on how to tackle the vices that continue to cause jitters among our investors. There is a need for a holistic outlook on the current financial sector scenario through sharing regulatory viewpoints, assessing anti-fraud resources and tools available, sharing knowledge coupled with experience and best practices with an objective of a harmonized approach across the sector both locally and regionally towards prevention and mitigation on the emergent fraud risk.

The Authority will on its part continue working closely with other public bodies and regulators such as Unclaimed Financial Assets Authority, Financial Reporting Centre, Insurance Regulatory Authority, Retirement Benefit Authority, the SACCOs Regulatory Authority and Central Bank of Kenya just to mention but a few .

The Authority continues to interact with market intermediaries and their associations (Kenya Association of Stockbrokers and Investment Banks (KASIB) Fund Managers (FMA), the Association of Custodians as well as market infrastructure providers like the Nairobi Securities Exchange and Central Depository Settlement Corporation, in facilitating smooth operations and a responsive regulatory environment for the development of Kenya’s capital markets as an investment destination of choice.

We look forward to hearing from UFAA and FRC on their role, expectations from players in the sector and to clarify issues which the entities operating in the capital market may be grappling with as they endeavor to ensure compliance with the underlying statutory obligations to these two agencies.

Ladies and Gentlemen it is now my pleasure to thank you for finding time to attend this forum and now declare the seminar officially open.

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