James Ndegwa to stay at NIC Bank amid conflict of interest fears

Money Markets

Mr James Ndegwa, the newly appointed chairman of the Capital Markets Authority. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Market watchers have pointed out that there is a potential conflict of interest for Mr Ndegwa because he has interests in the NIC Bank, which also owns stock market intermediaries, including NIC Capital and NIC Securities.
• The question is even more pertinent now because NIC Capital was in 2014 a subject of regulatory action by the CMA.
• Mr Ndegwa told the Business Daily that CMA had structures regulating how to deal with any potential conflict of interest.

Newly appointed Capital Markets Authority (CMA) chairman James Ndegwa Thursday said he will not resign as chairman of listed NIC Bank to avert conflict of interest as demanded by critics.

Instead, the publicity-shy chairman said he will opt not to participate in any deliberations on companies he has interests in.

Mr Ndegwa told the Business Daily that CMA had structures regulating how to deal with any potential conflict of interest.

Market watchers have pointed out that there is a potential conflict of interest for Mr Ndegwa because he has interests in the NIC Bank, which also owns stock market intermediaries, including NIC Capital and NIC Securities.

“If there is anything about the companies I have an interest in, then I would allow the board to discuss it without me being involved. I would not be present in such board meetings,” said Mr Ndegwa.

Mr Ndegwa spoke on the sidelines of a capital markets exhibition and conference at the KICC. The event has been held every year since 2013.

The question of conflict of interest is not new at the CMA with the late stockbroker Edward Ntalami having controversially been appointed to the same position.

The question is even more pertinent now because NIC Capital was in 2014 a subject of regulatory action by the CMA.

NIC Capital was accused of having a capital deficit contrary to the licensing requirements of the Capital Markets (General) Regulations. Though the amount of the deficit was not revealed, the company was asked to redress the situation not later than May 30 last year.

“The authority issued the directive that NIC Capital submit to the authority three monthly reports providing a clear update of the actions taken and the actual progress to be submitted on March 31, April 30 and May 30, 2014,” ordered the CMA.

Good practice

Former CMA chairman Kung’u Gatabaki recently said the potential of conflict of interest remained high for Mr Ndegwa. The former CMA chair said though there is no law stopping the regulator’s chairman from being a director in a listed company, it was good practice to avoid the situation.

“Based on good corporate governance, one must resign as a director of publicly traded companies upon becoming a regulator. In my case, I resigned from Mumias, TPS Eastern Africa where I held directorships when I became the chairman of CMA,” Mr Gatabaki said.

Others seen as having possible conflict of interest following recent appointments by President Uhuru Kenyatta are TransCentury managing director Gachao Kiuna and Standard Bank director of investment banking in East Africa John Ngumi.