Kenya’s stock market regulator, the Capital Markets Auth ority (CMA), has taken over the management of a fourth stockbroker, Discount Sec u rities, and suspended the firm from trading at the Nairobi Stock Exchange (NSE), officials said.
The Discount Securities Limited, one of the 19 stockbrokerage firms operating at the NSE, was placed under statutory management of the CMA after it failed to re f orm its cash management system and reduce its branch network to cope with market
CMA’s Chief Executive Stella Kilonzo said the rogue stockbroker would be placed under statutory managers for a period of six months as the new managers try to r e vive the firm after all efforts failed.
Discount Securities becomes the fourth stockbroker to be placed under statutory management after Francis Thuo and Partners, the largest stockbroker with more th a n 25 per cent of the 800,000 accounts at the NSE, was placed under statutory man a gement.
Bob Mathews, one of the original operators at the NSE, which was also placed und er statutory management, was lifted from the dead hole on Monday and its trading
license restored while the third, Nyaga Stockbrokers, is also under statutory ma n agement.
“CMA has appointed KPMG as the executive directors of Discount Securities in Oct ober 2008 after it became apparent that the stockbroker was facing serious corpo r ate governance and liquidity problems,” CMA said in a statement on Monday.
Kenyan bourse has more than 50 listed firms, mostly the blue-chip companies with high profits every year, operating in several sectors of the economy, including
banks, one mobile phone company, one internet firm, two media companies and comm e rcial entities.
The number of private investors operating at the NSE has been on the increase ov er the last three years since the listing of the Kenya Electricity Generating Co m pany (KENGEN) which brought in more than 200,000 retail investors.
The listing of several banks, one battery manufacturer, Eveready Batteries, Acce ssKenya, an internet firm, Equity Bank through a private placement and the share
issues – rights issue – by the Kenya Commercial Bank have marked the market’s st e ady growth.
However, the rate at which the stockbrokers have been placed under statutory man agement has raised the alarm about the growing list of woes facing the market.
The decline in the market has also been worsened by the decline of Safaricom – K enya’s largest mobile phone company shares, which slid soon after listing, faili n g to earn its initial clients the triple figure that the other new listings earn e d their investors.
CMA said it held several meetings with DSL directors to review progress on the a greed targets.
According to Kilonzo “although rationalization of expenses has been addressed to some extent, all other targets, including admission of strategic partners and i n jection of new capital, have not been achieved. Without additional capital, the b usiness is unsustainable.’’
She observed that in view of this, CMA had no option but to place DSL under stat utory management, in accordance with the Capital Markets Act, adding “the statut o ry managers will take over management, control, and conduct of the business of t h e brokerage firm to the exclusion of its Board of Directors.
“They will discharge their duties with diligence and in accordance with sound in vestment and financial principles, with particular regard to the interests of th e customers of DSL.”
The statutory manager will communicate to customers and creditors of DSL on the procedures for making claims in addition to the mechanisms to facilitate transfe r of CDS accounts for investors who desire to effect transfers to other market in t ermediaries.
Affected customers are also requested to give the statutory manager at least fou rteen days before forwarding any claims or lodging any requests for transfer of C DS Accounts.