Business Daily (Nairobi)
Washington Gikunju
26 May 2008
Nairobi — The Capital Markets Authority has renewed the licences for six stockbrokers who had faced suspension after failing to meet the regulators conditions.
Investors were thrown into a state of panic early this year when the Capital Markets Authority (CMA), in a letter dated February 26, gave six stockbrokers and two investment advisors three months within which they were supposed to comply with all the regulator's licensing conditions or face suspension of their licenses.
The Authority had in the meantime conditionally extended last year's licenses for the brokers and investment advisors for three months, which expired yesterday.
"It is notified for general information that the Authority has in exercise of the power conferred by section 11(3) (e) and pursuant to section 25 of the Capital Markets Act, today May 26 renewed the licenses of the above firms," said a statement from CMA's Corporate Communications and Market Development Manager, Samuel Njoroge.
Franklin Management Consultants, an investment advisory firm, however had its license suspended after it failed to meet CMA's conditions.
"Franklin Management Consultants limited has been suspended with effect from May 26, 2008," said the statement.
The firm's managing director, Andrew Franklin, had told Business Daily earlier this month that he could not raised the Sh2.5 million minimum capital requirement for investment advisors stipulated by the regulator among other licensing conditions.
The CMA board was locked in meetings with all the six stockbrokers and two investment advisors yesterday, after which the decision was reached to renew licences for all six brokers and one investment advisor.
Stockbrokers who were operating on the three months conditional licences and who have now had their licences for 2008 renewed include Bob Mathews, Ngenye Kariuki and Company, Discount Securities, Reliable Securities, Crossfield Securities and Solid Investment Securities.
Market share statistics for last year seen by Business Daily indicated that the six brokers controlled 13.5 per cent of the total equities turnover, equivalent to Sh22 billion of the Sh175 billion traded at the NSE in the period.
WSD Capital, an investment advisory firm, also had its licence for this year renewed.
All capital markets licensees are expected to apply for a renewal of their licenses every year, after which CMA is supposed to give their verdict on the license applications by end of March.
The CMA board has the option to either renew the annual licence unconditionally or renew the licence on condition that the licensee meets certain requirements within a stipulated time, or extend the previous year's licence for a period of three months.
A conditional licence allows a player to continue operations pending a review of the issues raised by the authority that prevent an outright renewal.
The new licensees are then published in the Kenya Gazette in the month of April.
Acting CMA chief executive Stella Kilonzo had previously told Business Daily that those running on extended licences "had no major problems", while most of the six brokers contacted said that the issues raised by the regulator were operational.
Common concerns raised in the six cases involved investor complaints touching on specific brokers, poor accounting records and overdrawn bank and clearing accounts.
"We were confident that our license would be renewed since we had fulfilled all the conditions set by the Authority," said Discount Securities Chairman William Murungu, adding that he was however happy that the renewal had been formalised.
Discount Securities has 20 branches situated in all major towns across the country, including Mombasa, Kisumu, Eldoret and Nyeri.
Mr Murungu says that his firm's quest for an upgrade of its licence to an investment bank was still on.
The NIC Capital managing director Mr Kevin Bender said that the licence renewals would restore normalcy in the capital markets and shore up investors' confidence.
NIC Bank's investment banking subsidiary, NIC Capital, acquired a majority stake in the then struggling stockbrokerage firm Solid Investment Securities early this year, but the stockbroker was already on CMA's watch list having breached some licensing requirements.Solid Securities has since the acquisition undergone a management and name change, and is now called NIC Capital Securities."
The renewal shows that the Authority is supportive of all the efforts we have put in transforming Solid Securities into a stable firm," said Mr Bender.
The new shareholders of NIC Capital Securities have injected Sh100 million in the firm, increasing its share capital from Sh30 million to Sh130 million.
Managing directors for Bob Mathews Stockbrokers and Reliable Securities, B M Awiti and Jos Konzolo respectively, were both held up in meetings and could not be reached for their reactions to the renewals.
The capital markets watchdog has been on the spot following last year's collapse of Francis Thuo and Partners Stockbrokers and this year's placement of Nyaga Stockbrokers under statutory management.
Francis Thuo went under with investors' funds estimated to have been over Sh100 million, while Nyaga is still under statutory management and verification of claims from an estimated 124,000 clients is expected to extend to next year.
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