Discount statutory manager gets six-month extension

Discount Securities went under in 2009 on fraudulent transactions by the firm’s employees. FILE 

By CHARLES MWANIKI
 

 

In Summary

• The extension gives investors more time to file compensation claims with the collapsed stockbroker and also transfer their investment accounts to other market intermediaries.

The statutory management period for collapsed stockbroker Discount Securities Limited (DSL) has been extended for a further six months from May 10.

The extension gives investors more time to file compensation claims with the collapsed stockbroker and also transfer their investment accounts to other market intermediaries.

“It is hereby ordered that the period of the appointment of the statutory manager of Discount Securities Limited be and is hereby extended for a further period of six months from May 10, 2013,” said the High Court in a notice published on Monday.

This is the third six-month extension of the statutory period for DSL. The CMA corporate communications manager Rose Lumumba said last year that more time was required to allow the statutory manager to finish the compensation process for DSL clients.

The Capital Markets Authority (CMA) manager for market supervision, Johnstone Oltetia, has been holding the position of statutory manager of DSL.

CMA started the second and final round of compensation for DSL investors in October and sought the extended period to complete the payouts. The exercise has been slowed by investors failing to file their compensation claims on time.

The first phase of compensation has been completed, having started in February 2012, when investors were paid up to a maximum of Sh10,000. The second phase of compensation involves payment to investors who lost up to Sh50,000.

New listings

DSL went under in 2009 on fraudulent transactions by the firm’s employees. The compensation is being done through the Investor Compensation Fund (ICF) which gets revenues from fees charged on new listings and a share of 0.01 per cent commission for every trade executed at the Nairobi Securities Exchange (NSE).

Other stockbrokers that have been placed under statutory management in the recent past include Nyaga stockbrokers, Francis Thuo and partners and Ngenye Kariuki and Company.

Ngenye Kariuki’s statutory management order was lifted in December 2011, although the company was left out of the 2013 list of Nairobi Securities Exchange (NSE) licensees, for the third year in a row (see article).

CMA’s 2012 annual report shows that by the end of 2012 the ICF stood at Sh422 million, up by 52 per cent from the Sh278 million in 2011.

In addition to the increase in ICF, the Capital Markets Fraud and Investigation Unit recovered Sh50 million last year, which includes settlement of investors’ money by fraudsters, values of shares reinstated and amounts frozen in various bank accounts, according to the CMA annual report.

The amount represents an almost 100 per cent increase in the sums recovered when compared to the Sh25.4 million recovered during the previous year. The CMA is by law obligated to pay a maximum of Sh50,000 per investor who loses cash invested in a collapsed market intermediary.