Investors at the Discount Securities offices after the stockbrokarage
was placed under the management of auditing firm KPMG in 2009.
Photo/FILE
By GEORGE NGIGI, gngigi@ke.nationmedia.com
Posted Friday, July 25 2014 at 00:00
Posted Friday, July 25 2014 at 00:00
In Summary
- The Capital Markets Authority (CMA) says money will be used to settle outstanding investor claims against firms - estimated at hundreds of millions of shillings.
- The stockbrokers fought hard to get included in the list of NSE owners ahead of the listing and were on course to receiving millions of shillings from the sale.
- The NSE will be selling 63.5 million shares to the public in the next three weeks at Sh9.50 per unit before listing them at the bourse on September 9. Investors will require a minimum Sh4,750 to participate in the offering.
Stockbrokers that collapsed with investor money will
have nothing to cheer about when the ongoing sale of Nairobi Securities
Exchange (NSE) shares to the public is complete with any proceeds of the
auction accruing to them set to be held by the markets regulator to
settle outstanding claims.
Nyaga Stockbrokers, Discount Securities, Francis Thuo,
Ngenye Kariuki and Shah Munge were allocated 5,250,000 shares each
valued at Sh250 million despite having collapsed more than three years
ago.
The Capital Markets Authority (CMA) says any
initial public offering (IPO) cash accruing to Nyaga Stockbrokers and
Discount Securities, both under statutory management, will be seized to
settle claims against them estimated at hundreds of millions of
shillings.
“The value of share ownership in the NSE of these
two entities (Nyaga and Discount) will continue to be held for the
benefit of settling valid claims from investors,” said CMA acting chief
executive Paul Muthaura.
Mr Muthaura added that the Investor Compensation
Fund also has a claim against the two brokers arising from settlement of
client claims.
Francis Thuo’s IPO cash will go to Equity Bank, which bought the broker together with its liabilities last year.
The stockbrokers fought hard to get included in the
list of NSE owners ahead of the listing and were on course to receiving
millions of shillings from the sale.
Most of the stockbrokers are owned by individuals,
making them direct beneficiaries of the IPO cash and the regulators
appear to be seeking to forestall a possible investor outrage at the
prospect of collapsed brokers benefiting from the share sale without
settling outstanding debts.
The compensation fund has paid investors who lost money with the collapse of brokers a total of Sh365 million.
A forensic audit conducted after the collapse of
Nyaga Stockbrokers showed that investors lost Sh1.3 billion and an
equally large amount of money is estimated to have been lost with the
collapse of Discount Securities.
The investor compensation fund had Sh727 million at
end of June last year, according to the CMA’s annual report and has not
recently made any payments to investors.
Most of the Nyaga Stockbrokers investors have been paid and the CMA started paying Discount claims in 2012.
The investor compensation fund has also been
allocated 6,562,500 shares in the NSE worth Sh62.3 million in
recognition of the role it has played to win back investor confidence
after a series of broker collapses.
The fund has a maximum compensation limit of
Sh50,000, meaning that those whose claims were not fully settled because
of the cap could go back for more.
Consolidated Bank has recently gone to court
seeking to appropriate assets that Nyaga Stockbrokers used as collateral
for loans it took from the lender.
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