Combating insider trading in Kenya’s capital markets: challenges and opportunities for reform

Abstract

The capital markets are expected to play a pivotal role in the attainment of Kenya’s development blueprint ‘vision 2030.’ It is, therefore, essential that obstacles to the attainment of a fair and efficient market are examined and rooted out. This study investigates the limitations of the Capital Markets Act in combating insider trading. It also examines whether reforms would promote a fair and efficient capital market. The study makes use of existing literature as well as decided cases to investigate the inadequacies in the formulation of and provisions for inside information, material pricesensitive information, publication of information, possession of information and disclosure of information in the Capital Markets Act. This literature draws out key learnings from other jurisdictions and analyses how legislation in developed economies treats challenges to the enforcement of insider trading laws. The doctrinal analysis is triangulated with results of a survey of practical experiences of legal practitioners in applying the Capital Markets Act. The findings affirm the existence of conceptual difficulties in determining the elements of the crime of insider trading. As a consequence, it is concluded that the present formulation of insider trading law is inadequate. The study, therefore, makes suggestions for reforms to the provisions on insider trading in the Capital Markets Act.