LAW/MG/0807/09/20- NATECHO PURITY SUNSHINE
a.) What are the procedures for investigation and enforcement before the committee of
the Board of the CMA?
The procedures for investigation and enforcement are provided in the Investigation and
Enforcement manual.1 This manual expounds on the functions of the Capital Market
Authority, as provided in the Capital Market Act Cap 485A. This procedure can be
summarized into several subcategories as follows:
i.) Opening an investigation; An investigation is formally opened by the Manager of
Investigations and Enforcement, once they receive authorization from the Chief
executive officer.2 They will then set up an investigation team and come up with an
investigation plan. This investigation is supervised by the Head of investigations
who reports back to the Manager of Investigations and enforcement. However, if an
investigation is initiated due to a public complaint the formalities for such an
investigation will be more relaxed.
ii.) The investigation team; Persons who have a conflict of interest with the subject
matter of the investigation will not be assigned as investigators. Members of the
investigation team are also required to have legal as well as forensic accounting and
investigating skills.
iii.) Acquisition of information and summons; One of the powers that the CMA has
under the Capital Market Act is the power to get information relating to the matter
under investigation.3 It also has the power to summon persons for interviews. The
person summoned is allowed to have legal counsel present for matters affecting law
only. The CMA can also apply to a Magistrate for the grant of a warrant to enter
and search premises.
iv.) Discretion to keep the investigation confidential; The CMA is empowered to decide
whether it should give the person under investigation notice or not. It is expected to
give notice to the person once the investigation is initiated but can choose not to do
so if the same will jeopardize the investigation.
1
Capital Markets Authority, Investigation and Enforcement manual, 2020.
2
Capital Markets Authority, Investigation and Enforcement manual, 2020.
3
Capital Market Act (Cap 485A), Section 13.
v.) Findings report; The Manager for Investigations and Enforcement will receive a
detailed report from the investigation team disclosing their findings. This report is
then shared with the Director of Market Operations and finally the Chief Executive
Officer. The same is shared with the person under investigation with a notice to
show cause. The person then decides whether they will be contesting the findings or
they’ll settle.
vi.) Enforcement mechanisms; The CMA resolves most investigation cases by
settlement. It can also make an application for asset freezing to the court. For assets
within its jurisdiction, the CMA does not need a court order.
b.) Describe the changes to judicial attitude to the powers of the CMA board to conduct
hearings under the NTSC before and after the case of Poppat v CMA.
The change in judicial attitude to the powers of the CMA board to conduct hearings
before and after the case of Poppat v CMA can be summarized as follows; Before the
Supreme Court pronouncing itself on whether the duality of power conferred by statute
on the CMA was unconstitutional, courts had ruled that the same was unconstitutional.
They believed that the CMA acting as the investigator, prosecutor, judge, and executioner
was a violation of the rules of natural justice.4 However, in the Poppat v CMA5 case, the
court clarified by stating that the overlap was not unconstitutional per se, despite its
eventual decision that there was potential for bias on the part of the CMA. It stated that
there could be an exception to the Nemo judex in causa sua esse principle if the overlap
of functions is a creature of statute and the constitutionality of the statute is not disputed.
Courts now have a change in attitude toward this overlap of functions, as evidenced in the CMA
v Chadwick Okumu6 case. The court set aside the High Court’s finding that the investigation
conducted by the applicant on the respondent had been done in a manner that violated the
principles of natural justice.
4
Chadwick Okumu v Capital Markets Authority, Constitutional Petition 510 of 2016, Judgement of the High Court, 2
May 2018, eKLR, para 75.
5
Alnashir Poppat and 7 others v Capital Markets Authority, Constitutional Petition no 29 of 2019, Judgement of the
Supreme Court, 11 December 2020, eKLR
6
Capital Markets Authority v Okumu, Civil Appeal 302 of 2018, Judgement of the Court of Appeal, 6 October 2023,
eKLR
