Seeto heads CMDA, independence questioned

August 26, 2009 01:26:48 PM

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The independence of Fiji’s capital markets watchdog is being questioned, following the controversial send off last week of CEO Mereia Volavola, who has been replaced by the entity’s manager licensing, regulations & enforcement Wati Seeto.  

In a statement yesterday, the Reserve Bank of Fiji - regulator of Fiji’s money market - reiterated it will consolidate the operations of the Capital Markets Development Authority under its wings and that it has appointed Seeto as “Officer-in- Charge in the interim until a final move of staff to the Reserve Bank takes place by end October.”

It’s a move that has been frowned upon by participants in the local capital markets, who believe there will be a conflict of interest as the Reserve Bank also issues and oversees bond trading, making it answerable to the CMDA.

“The capital markets should be kept separate from the money markets,”said a concerned party.  

“There are probably good intentions behind this move but it brings into question the role of the independence of CMDA, who regulates the bond market. Now that it has to be answerable to the RBF, who themselves are involved in issuance and trading of bonds, how can it clamp down on RBF when it is just one of the smaller branches within RBF? It’s like regulating your own parent company so there is a conflict of interest here.”

Last week, Prime Minister and Minister for Finance, Commodore Voreqe Bainimarama announced that with effect from 13 August, 2009 the administration of the Capital Markets Development Authority (CMDA) Act had been transferred to the Reserve Bank of Fiji (RBF).

“This is part of the Government’s ongoing review of the Financial Services Sector in Fiji and the overall and continuing reform of the public sector to bring about greater efficiency and cost savings,” he said.

“The CMDA was established under the CMDA Act 1996 and commenced operations in 1998. It was hoped that the capital markets would grow sufficiently so that the industry would be able to support bulk of the operating costs of the CMDA.

However, this has not happened and the cost of operations kept on escalating and was expected to reach almost $1.6 million by 2010. The total operating and capital expenditure was expected to increase by 95 percent this year to $1.3 million and the operating expenditure was budgeted to increase by 32 percent to $800,000. This type of cost escalation was difficult to sustain,” Bainimarama added.

Yesterday, RBF governor Sada Reddy pointed out that some supervision and regulation processes will be reviewed when the two entities are integrated and ruled out the laying off of CMDA staff, who he assured would be absorbed into other parts of RBF on their existing terms and conditions.

“The experience and expertise of the RBF in the financial sector supervision, regulation and development will enhance the work done to date by the CMDA,” Reddy said.

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