Whistleblowers to get Sh5m as CMA steps up fraud war

Capital Markets Authority (CMA) CEO Wyckliffe Shamiah on April 29, 2021. PHOTO | LUCY WANJIRU | NMG

Whistleblowers will earn up to Sh5 million for leaking capital market fraud after the regulator gazetted new rules in an effort to stop economic crimes.

The Capital Markets (Whistleblower) Regulations 2022 outlines how the rewards will be implemented including compensation of 3 percent of the amount recovered, persons eligible for the reward, forms of reporting, information required and the protection for the informants, among others.

“Where CMA successfully recovers penalties and illicit gains in the capital markets, whistleblowers shall be eligible to a reward of 3 percent of the amount recovered subject to a maximum reward of Sh5 million in line with Section 18 (2A) (b) of the Capital Markets Act and the Whistleblower Regulations,” said Wyckliffe Shamiah, CMA’s chief executive officer.

The remainder of the funds recaptured will be transferred and held in the investor compensation fund. The informer will get compensated after 90 days upon repossession of sums lost.

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The new laws highlight instances of reportable misconduct including capital market fraud, failure to comply with the CMA laws and other offences under the Act.

The CMA banks on the award scheme to promote investor confidence in markets by arresting irregularities in the market such as share price manipulation, insider trading, breach of governance code and theft among others.

These regulations also provide for witness protection for the notifiers, addressing a sticking point that has discouraged many from volunteering information about corporate fraud.

“The Capital Markets (Whistleblower) Regulations, 2022 seek to promote investor protection and confidence in the capital markets by encouraging CMA licensees and listed companies to comply with the Act and Regulations,” said Mr Shamiah.

Reports made anonymously, or in person should include substantial details and evidence of misconduct or contravention of laws that can assist the authority with its investigations, leading to the retrieval of illicit gains and penalties.

Information provided to the Authority under the Regulations may be released to the Office of the Director of Public Prosecutions or any other regulatory body.

“CMA will implement reasonable measures to protect the identity and all information about whistleblowers in line with the Witness Protection Act,” the regulator said.

The authority also cautions anyone who offers false information that they shall be liable to conviction.

Collaborators working in law enforcement, judicial administration, appropriate regulatory agency or who have been convicted of criminal misconduct cannot claim compensation.

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“A reward shall not be payable to a whistleblower who at the time he acquired the original information submitted to the authority, is or was a member, officer, or employee of any government or any self-regulatory entity that is under an obligation to report any such misconduct or offence,” the regulations read in part.

Other regulators and government agencies which offer awards for fraud reports include the Kenya Revenue Authority (KRA) which rewards those who report tax cheats.

The Competition Authority of Kenya (CAK) pays those who report restrictive business practices like price-fixing and rigging of tenders a reward of not more than one per cent of the administrative penalty imposed or not more than Sh1 million.

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