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 signal