Role Of Fraud Investigation Unit In Management Of Crimes In Capital Markets Industry In Nairobi County, Kenya

ABSTRACT

The Capital Markets (CM) is a significant economic component in most economies of any country since it is a vehicle for raising capital funds for public institutions. As such, the capital market’s effective performance is of great interest to the economic development in any society. This study examined the role of Fraud Investigations Unit in managing fraud in Capital Markets within Nairobi County. The study also examined the influence of fraud investigations on the development and growth of the market generally. The objectives of the study were to establish the manifestations of fraud, explore the strategies developed by the Capital Market Fraud Investigation Unit in managing fraud within the sector and to find out the challenges the unit faces as it undertakes its assignment. The study was guided by the Rational Choice theory and Routine Activity Theory. The two theories were helpful in discussing the social behaviour of offenders. A descriptive survey research design that involved the use of questionnaires and in-depth interview of key informants was used. The study targeted a population of 289 employees of the market players within the capital markets industry and 3 key informants drawn from the industry players. The employees were sampled using stratified random sampling design while the key informants were purposively sampled. The sample size for the police officers and key informants were 89 and 3 respectively. Primary data was collected using questionnaires as well as semi-structured interviews. Secondary data was accessed in records available among various policing and accountability oversight bodies. The data was analysed qualitatively by use of themes and content analysis methods. The study established that fraud management strategies had a positive impact on capital markets, in Nairobi County. However, misaligned incentive structures and weak cultural values have resulted to reputational damage and distrust among capital market firms. The study concluded that Fraud Investigations Unit in the capital markets had initiated several detection strategies key of which included surveillance system and information sharing. Despite the above, the study found out that fraud investigation unit encountered several challenges in the process of managing crimes in the capital markets. The study recommended that capital market firms must revise their respective codes of conduct, establishment of advanced monitoring software to enhance accountability and revamping of the risk management program.