Monitoring compliance to determine the effectiveness of the Kenya Association of Stockbrokers code of ethics by members firms

Abstract

This study monitored the effectiveness of the Kenya Association of Stockbrokers (Kasib) code of ethics by looking at whether members complied with factors known to make for effective codes such as leadership and method of code implementation, and the role of the Capital Markets Authority (CMA) of Kenya when it came to codes. The study was descriptive and used questionnaires to collect data from stockbrokers while secondary data was used in gathering information about the CMA. Results were mixed showing that while some Kenyan stockbrokers do have codes of ethics which detail sanctions for violations and offer some form of ethics training, others do not. The piecemeal implementation suggests that Kasib seems to lack teeth to enforce these compliance factors necessary for code effectiveness. While the CMA encourages codes of ethics it does not actively monitor their implementation as its main concern is with fraud. As such, it regulates the stockmarket through market surveillance, on and off site inspections of stockbrokers and has recently moved to risk profiling. This suggests that the haphazard implementation of codes of ethics may be due to the lack of enforcement of codes by the CMA This study recommends engagement between stockbrokers and the CMA on code of ethics issues so that codes of ethic can be adopted and implemented successfully by stockbrokers. Kasib also needs to enforce its code of ethics by punishing members that do not adhere to the code.