East Africa seeks to harmonize investor compensation to deepen capital markets

The East African Community (EAC) member states will hold talks to harmonize the amount of funds that capital market investors will be compensated in case of a loss suffered as a result of failure of market intermediaries to meet their contractual obligations, officials said Friday.

Kenya’s Capital Market Authority (CMA) CEO Paul Muthaura told Xinhua in Nairobi that currently each of the six partner states offers different amounts as investor compensation.

“We are hoping that the EAC Council of Ministers will soon adopt 1,000 U.S. dollars as maximum compensation for capital markets investors for the region as part of plans to promote regional integration,” Muthaura said during preparations for Kenya to participate in the World Investor Week celebration from Oct. 2 to 8.

EAC member states include Kenya, Uganda, Tanzania, Burundi, Rwanda and South Sudan. Each EAC member state will be required to set up an Investor Compensation kitty that will be funded by fees charged to capital market players.

Muthaura said that once the new compensation is agreed upon at the EAC level, then member states will be required to amend their laws to conform to the regional law.

In Kenya, capital markets investors can be compensated up to a maximum of 500 dollars if market intermediaries collapse while holding cash for purchase of shares.

“This level of compensation is not sufficient given the rising level of cost of financial instruments traded in the capital markets,” Muthaura added.

He said that the trading bloc is committed to increase compensation for investors in order to promote confidence in the capital markets by ensuring transparency and prompt payment of claims. Enditem

Source: Xinhua/NewsGhana.com.gh

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