Referee or Kingmaker? How CMA’s Boardroom Micromanagement Is Freezing Kenya’s Market

The Capital Markets Authority was created to be an impartial referee—licensing, supervising, setting clear rules, and enforcing them fairly. When a referee starts dictating line-ups, renaming teams, and calling plays, the game collapses. Our capital market has flirted with that collapse. The law’s promise is simple: regulate the field, don’t play the match. Section 11 of the Capital Markets Act and CMA’s own handbook frame the mandate—license, supervise, ensure proper conduct, and protect investors—nothing about appointing directors or running companies.

Kenya’s Corporate Governance Code (2015) took a principle-based “apply or explain” approach—raise standards, demand disclosure, respect board autonomy. In 2023, key parts of that Code were pulled into hard law via the Public Offers, Listings & Disclosures Regulations, making compliance an enforceable obligation. Enforceable standards, yes; managerial substitution, no. Codes guide and test; they don’t turn the regulator into a de facto director.

Courts and tribunals have now redrawn the touchline with unusual clarity. In Limuru Tea PLC v. CMA (4 Sept 2025), the Capital Markets Tribunal faulted CMA for relying on press clippings rather than verifiable evidence when assessing governance—reminding the Authority that adjudication must rest on proof, not headlines. A referee cannot blow the whistle on rumors.

The same Tribunal also affirmed a foundational principle: only shareholders can appoint or remove directors. Regulators may police the rules and sanction breaches, but they do not pick the board. That bright line is essential to fiduciary accountability—directors owe duties to the company as a whole, not to a regulator’s momentary preferences.

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To be fair, the Limuru decision was not a blanket win for issuers; it upheld certain findings on non-compliance (e.g., board composition and nomination-committee independence) during the review period. The message is balanced: CMA may test boards against law and Code and sanction lapses—but must prove its case properly and stay within statutory boundaries.

Kenya’s Supreme Court had already mapped the guardrails in Alnashir Popat & 7 Others v. CMA (Imperial Bank). It affirmed CMA’s dual mandate: investigative and enforcement powers are real and necessary—but must be exercised within the Act, with due process and fair hearing. That is the legal heartbeat: vigorous oversight without administrative overreach.

High Court precedent has likewise checked managerial micromanagement. In litigation involving Cytonn Asset Managers, Justice Njoki Mwangi’s judgment noted CMA’s directive to rename products and change the company name—an intervention the decision treated as straying beyond the statute’s remit. Naming is not a capital-markets function; it is a corporate and IP function subject to the Companies Act and other regimes.

Process matters, too. In a separate Cytonn matter, Justice Grace Nzioka ordered proper notice and constrained unilateral regulatory action, underscoring that even where CMA is right on substance, it must be right on procedure. Enforcement without due process is still unlawful, and courts will stop it.

Taken together, these rulings are not an attack on regulation; they are a defense of it. Oversight tethered to statute and evidence builds confidence; improvisation fueled by press noise or policy zealotry kills it. The judiciary is telling CMA: police principles and outcomes—don’t pick the cast, write the script, and direct the scene.

So what does “police principles and outcomes” actually mean? It means testing whether boards meet mandatory thresholds on independence and composition, whether they have functioning nomination and audit committees, whether they disclose related-party transactions, and whether they explain any deviations from Code norms. Enforce those with clarity and speed; leave boardroom appointments to shareholders.

Nomination committees exist precisely to professionalize director selection and succession. When a regulator begins “suggesting” names or ring-fencing seats, it dilutes accountability. Directors must look to the company and its investors—not to survive tomorrow’s regulatory mood. The Tribunal’s re-statement of shareholder primacy in appointments resets the compass.

Similarly, onboarding clients is a matter of licensing conditions and conduct standards. CMA can set and monitor risk-based onboarding rules for market intermediaries, but picking dates and client cohorts for specific firms crosses from oversight into operations. The High Court’s insistence on lawful, procedurally fair directions signals that control of day-to-day customer acquisition belongs to boards and management, within the law.

On product and company naming, the boundary is even clearer. The regulator can require fair, non-misleading disclosures and stop deceptive labeling; it cannot rebrand firms by fiat. Justice Mwangi’s decision is a cautionary tale: stay in your lane or the court will push you back.

On valuation, CMA’s job is to set the framework—approved methodologies, independent oversight, disclosure, and audits—not to dictate a number. Once a regulator dictates valuation outcomes, it owns the balance sheet and the litigation that follows. It should test for process integrity and misstatement, not perform management’s work.

Where the Code is “apply or explain,” the Authority should scrutinize the explanation and, if weak, escalate to sanctions under the 2023 Regulations. That is smart regulation: demand transparency, reject boilerplate, and punish non-compliance. It is not smart regulation to substitute regulatory judgment for the board’s, especially in areas the law reserves to shareholders.

The costs of blurring these lines are not academic. Kenya went nearly a decade without a traditional IPO; firms saw the public market as unpredictable, disclosure-heavy, and occasionally arbitrary. You cannot promote listings while scaring potential issuers into staying private. A stable, rules-first CMA would help reverse the drought.

Yes, there are green shoots—new listings and structured products suggest renewed appetite. We should not crush that momentum with regulatory theatrics. Predictability attracts capital; caprice repels it. The choice is ours.

CMA’s own materials emphasize a “fair, efficient and orderly” market that promotes investor confidence. Confidence does not come from backstage casting; it comes from clean rules, quick decisions, and public, evidence-based sanctions. That is where the Authority’s brand is strongest.

The Tribunal also sent a crucial evidentiary message: media coverage is not proof. Investigations must rely on verifiable records, not headlines. That is how enforcement survives appeal and earns respect from the market.

Let’s set out a practical charter for the Board of CMA to rein in mission creep. First, adopt a bright-line policy: no involvement in board selection or director horse-trading. Enforce composition and independence tests, yes; suggest names, never. Build a published “no-surprises” protocol so issuers know exactly how decisions are made.

Second, anchor every action in statute, regulation, or the Code, cited chapter and verse. Where the Code gives flexibility, assess the explanation; where regulations make it mandatory, sanction swiftly. Publish reasoned decisions with the evidence relied on and the legal basis—so the market knows this is law, not taste.

Third, formalize a “governance audit standard” that relies on filings, minutes, registers, and independent attestations—not newspaper cuttings. This both raises audit quality and immunizes decisions on appeal. The Limuru lesson should be institutionalized.

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Fourth, separate “development” from “enforcement” functions in practice, even if the law allows both. The Supreme Court says you can do both; the market says do them with Chinese walls. Guidance and sandboxing belong on one side; penalties and trading halts on the other.

Fifth, create a public sanctions register with graduated penalties—warnings, fines, directorial suitability notices—so the market reads a steady rule-of-law rhythm, not improvisation. Consistency is a listing incentive; unpredictability is a delisting incentive.

Sixth, require Regulatory Impact Assessments before introducing new governance interpretations that go beyond prior practice. Where the market will bear new burdens, justify them, and phase them. Kenya needs listings, not lectures.

Seventh, commit to “evidence-first engagements”: if CMA sees a governance gap, it should call for documents and explanations, then decide. Announcing tentative findings through the press invites appeals and undermines credibility. The Tribunal has already warned against that path.

Eighth, work with the Judiciary on expedited capital-markets lists for urgent applications. Fast, fair dispute resolution reduces uncertainty premiums and lowers the cost of capital, which is the whole point of having an exchange.

Ninth, publish annual “comply or explain” scorecards that separate mandatory breaches from best-practice gaps. Investors can price the difference; companies can plan remediation. But don’t wage proxy boardroom wars in the name of the Code.

Tenth, remember that the Authority’s legitimacy flows from Parliament’s Act and the courts’ supervision. The recent run of decisions isn’t anti-CMA; it is pro-law. Embrace the correction, and the market will reward the Authority with deeper participation and cleaner governance.

In truth, Kenya needs a tougher CMA in the right places: insider trading, market manipulation, disclosure failures, related-party abuses, and governance fakery. Be relentless there. But a regulator cannot at once be the whistle, the rulebook, the captain, and the coach. That is not strength; it is instability.

Boards, for their part, must meet the higher bar—independent chairs, majority non-executives, real nomination committees, transparent related-party disclosures. Meet the law and explain deviations. The regulator will have less excuse to wander into boardrooms when those boardrooms are solid.

For potential issuers watching from the sidelines, clarity is currency. When CMA enforces rules as written and leaves strategy to boards and choice to shareholders, the fear premium shrinks. Listings rise, bond markets deepen, and Kenya’s corporates tap long-term money at lower cost. That is the development mandate in action.

So, here is the call. Board of CMA: rein in management. Demand evidence-based enforcement. Draw red lines against picking directors, renaming companies, selecting clients, or dictating valuations. The law doesn’t give you those jobs; the market won’t forgive you for taking them. The courts have spoken. Now governed by the book.

And to issuers, investors, and policymakers: insist on a regulator that is a superb referee—decisive, invisible in victory, and respected by both sides. That is how you build a market people want to list on, not leave.

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