A regional securities regulatory body has recommended a regional stock exchange as a way of adopting the demutualization approach Kenya has taken.
The East Africa Securities Regulatory Authority’s (EASRA) 31st consultative meeting was held in Tanzania recently and made the recommendation.
The demutualization of stock exchange will see the stock markets review their governance structure from government ownership to where companies are with multiple shareholders.
“The issue of governance especially in decision making is always a problem where there is no demutualization,” said Olivier Kamanzi Deputy Executive Director of the Capital Markets Advisory Council (CMAC).
He also stressed that demutualization would be important for guiding institutions in strategic direction for development.
The meeting which took place on 11th August 2010 in the Tanzanian town of Moshi also adopted reports of EASRA sub committees which included the legal issues sub committee, marketing development, market supervision and risk management sub committees.
“In Kenya, a committee has already been put in place that will work to steer the demutualization process while the other countries have been urged to emulate Kenya,” added Kamanzi.
However, Rwanda’s stock market is already demutualised with shareholding in government, National bank of Rwanda, Social Security Fund, Development Bank of Rwanda among others.
Capital adequacy for market intermediaries was another item that was high on agenda at the Moshi meeting.
Kamanzi said that market intermediaries such as stockbrokers, fund managers and custodians should meet a minimum capital requirement to practice for instance for stockbrokers in Rwanda, they should posses at least Rwf10 million in capital.
“Some members have failed to meet this requirement and an agreement has been reached to harmonize the framework hence protection of public money,” explained Kamanzi.
The meeting that was attended by executives of regional stock markets, representatives of banking and non banking institutions also noted the urgency with which the common market protocol should be implemented given that business were pursuing opportunities at a regional level.