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Kenya: Six Stockbrokers Put On Notice By CMA
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The Nation (Nairobi)
29 April 2008
Posted to the web 29 April 2008
Joseph Bonyo
Nairobi
Alarm bells are ringing in the stock market after the Capital Markets Authority warned six stockbrokerages to put their houses in order.
True to form, the regulator was vague on the nature the shortcomings it wants corrected by the six, but the move will likely send shivers down the spines of investors, coming so soon after Nyaga Stockbrokers ended up in receivership under the weight of unmet financial obligations.
The six were among the selling agents of the just concluded Safaricom Initial Public Offering.
As a result, their licences have only been extended to May 26. The notice was published in the Kenya Gazette last Friday, by acting Capital Markets Authority (CMA) chief executive officer, Stella Kilonzo.
The condition given by the regulator requires the stockbrokerages to shape up before the deadline, or risk losing they licences altogether. The law requires that the CMA renew the business licences of market players at the end of March every year, which are then gazetted at the end of April. The six firms include Crossfield Securities, Discount Securities and Ngenye Kariuki and Company Limited.
Others are Reliable Securities, Bob Mathews Stockbrokers Limited and Solid Investments Securities Limited. However, earlier in the year, NIC Capital, a subsidiary of the NIC Bank acquired Solid Investments, which now operates as NIC Capital Securities.
Attempts by the Nation to get response from the firms were not fruitful as we were informed that they busy finalising on the Safaricom IPO application whose deadline was on Monday.
Downplayed
Mr Stanley Osango, chairman of the Investors Association of East Africa (IAEA) however downplayed the issue.
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"I have spoken with a number of the affected firms and I can assure you that the problems are not related to cash flow. They will be able to sort them out with time," he said.
Only three months ago, 250,000 investors were left in the cold after Nyaga Stockbrokers was put under receivership for failing to meet its financial obligations. Investors too accused the broker of trading in their shares without consent.
According to the markets authority stipulations, a stockbroker is required to have minimum of Sh5 million as capitalization. Investments banks on the other hand are expected to hold at least Sh30 million in shareholders fund.
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