The Capital Markets Authority (CMA) has embarked on the first round of inspections of licensed intermediaries for the financial year 2019/20. During this round, the Authority will be inspecting fund managers, following a risk profiling exercise that was conducted a few weeks ago. The key areas of focus will include business process risks, governance, internal controls, compliance with laws, rules and regulations as well as Anti-Money Laundering (AML) requirements. Since 2015, CMA adopted a risk based supervisory approach which aims to promote transparency, providing early warning signals and encouraging the regulated entities to self-evaluate their position at regular intervals. The risk profile of each intermediary determines the supervisory programme comprising of off-site surveillance, targeted on-site inspections, prudential meetings and regulatory actions as warranted.
The process of risk-based supervision involves continuous monitoring and evaluation of the risk profiles of market intermediaries in relation to their business strategies and exposures.
During the last round of inspections conducted in the 2018/19 financial year, focus was on assessing the adequacy of compliance with regulatory requirements, the AML and countering financing of terrorism requirements and, financial accounting controls. A total of nine licensed firms, including brokers, fund managers, unit trust schemes, an exchange and a securities central depository were inspected.
The 2018/19 inspections revealed among other things, the need to pay more attention to trustees of unit trust schemes,owing to the vitality of their role in the management of the schemes. The primary duty of the trustee is to protect the interests of investors by monitoring actions undertaken by the unit trust manager. It was observed that firms still have gaps in various areas, key among which is record keeping, governance practices and compliance with all aspects of the regulations. One enforcement action was also undertaken, arising from this inspection.
Once the ongoing inspection of fund managers is concluded, inspection of the trustees will begin. Currently, there are only two firms offering trustee services, namely, KCB Bank Uganda and Standard Chartered Bank Uganda.