Uhuru does seem to understand the symptoms of the ailment, which was misdiagnosed by Hon. Kimunya as the under-capitalization of stock brokerages and investment banks. The problem, actually, is at the heart of the governance of these organisations: can the regulators, as now constituted, stamp out irregular dealings?

We cannot see the problem without an end-to-end view of how companies are formed, run and closed in the Kenyan environment, because only then is the root of the problem revealed. The very fact that our laws have fragmented and delinked the authorities tasked with overseeing the supervision of companies -- private and public ones -- during their lifecycle -- from the process of registration to the time a business folds --  severely handicaps its ability to provide strong oversight in not only the financial services firms -- where only the Central Bank seems to exercise its authority effectively -- but also in other private entities that require state supervision and guidance to ensure investors' capital is protected.

So we have the Attorney General's office tasked with company registration. But once the private company is in existence, there's little or no supervisory authority  -- save for Banks where the Central Bank plays its role;  and tax compliance, where KRA is efficient, though it might have injected stricter financial discipline in the course of its tax collection, but for its lack of supervisory authority over company activities.

We have, however, reactively formed the CMA to supervise both publicly-listed companies and some of the organisations offering services within the capital markets like the investment banks.  Most of these brokers are private, indeed, most of them are one-man shows or club-like entities. I doubt most of them keep proper financial records, since there are no institutions to supervise them. It's probably for this reason that Kimunya thought that they needed to be made too big to fail, hence the paradigm of capitalisation as the solution. Yet we know that 'big enough not to fail' is a fallacy looking at the fallen dominos from the phenomena of global de-leveraging. From Lehman Brothers to Bear Stearns to Merill Lynch, 'too big to fail' does seem an illusion.

"This time, we intend to take firm and strong action to ensure the NSE operates in a transparent manner. We want to strengthen these organisations, so that CMA can have greater supervisory roles. The Government has been very much aware of these problems in the stock markets and the way they have impacted on the confidence that the Kenyans as well as foreign investors have on the stock exchange," said Uhuru.

And this is it: the corporate governance in the brokerages and investment banks is a big problem, so how do we ensure that they invest in management and operations practices that will guarantee the good governance that might mitigate the risks of investor's losing their savings?

I doubt the change of boards is a fundamental remedy, though it is part of the solution: talent is a big problem for the CMA, at both the executive and board level, and the same applies to the NSE.  But this alone will merely treat symptoms while the fundamental problem persists: the overall government framework for regulating  all corporations during their lifetime. That this task has been left to the AG, and probably, in some cases the KRA and to some extent CMA, works against the grain of enforcing strict corporate governance as corporations grow. These functions need to be consolidated in one powerful institution: it makes sense to remove company registration from the AG, and review the corporate act to harness the capability of this new institution, including, perhaps, its investigative (and prosecutorial?) powers.

Registration of corporations, monitoring of corporations' (whether private or public) activities and compliance -- except tax, environmental or product quality --  should be handled by this authority. Given the authority required to offer such oversight, greater infrastructural capabilities are necessary. This might be the beginning of more formal management structures in both private and public corporations, an important step in formalizing the economy and in the creation of better jobs for the employed.

The events of the last few months, where irresponsible brokerage firms have ripped-off Kenyans, should not be wasted through cotton candy solutions: the opportunity to reform the regulation of the relevant legal entities, and to improve their governance, won't soon come again in as pure a form as this.

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