Once again it is a big thrust to the ongoing programme of financial reforms, as parliament started to deliberate on the Capital Markets bill, which if passed, shall establish the Capital Markets Authority to replace the Capital Market Advisory Council (CMAC).
The new law will also establish the Rwanda Stock Exchange, which will replace the Rwanda Over-The-Counter (OTC) Market, as the country’s principle stock exchange and also affix some of the ambiguities in capital market regulation while integrating it with the company law, which is the mother law of business.
This is not to mean that since the establishment of CMAC early last year the institution was not regulated in any way. But there has always been need to improve the infrastructure in order to meet regional and international financial regulatory requirements while protecting investors.
The new law is really an important step towards having a regulatory framework that is vital for the success of the financial markets in the country through principles emphasising wide requirements for disclosure of financial activity, including security trading, participant accounting etc.
It is also real opportunity to enhance global financial reporting standards, consistently applied and enforced across all the major regional capital markets.
Despite having independent national regulators, our economies operate in world where securities markets are integrated. Rwanda is already a member of the East African Securities Regulatory Authority and is seeking to join the International Organisation for Securities Commissions (IOSCO).
It is therefore essential that the country’s financial system maintains good links with the regional and global financial system.
As economies and markets in East Africa become increasingly related to each other through the East African Community integration, it is vital for capital market regulators in Rwanda to facilitate capital flow and access to new and wider investor markets.
Mary L. Schapiro, the 29th chairperson the U.S. Securities and Exchange Commission (SEC) said before the United States Senate Committee on Banking, Housing and Urban Affairs in March, 2009 at the apex of the financial turmoil that: “All economic activity starts with capital.”
Really, small businesses need money to start up, existing companies need capital to innovate, compete and expand. This capital comes from investors mainly through financial institutions that act as intermediaries between deficit spenders and surplus spenders.
For the economy to function well financial institutions must play their role by attracting this capital and channeling it to institutions, companies or individuals that need it. However investors expect a return on their investments (profit) and are always seeking protection.
So, a vibrant and agile market regulation is critical to attracting these investors into the market through building confidence by prohibiting fraudulent trading practices, manipulation of securities prices, insider trading and other market abuses.
The writer is a Journalist