CRDB Managing Director Dr Charles Kimei
TANZANIA’s portfolio investment has reached almost 10tri/- but the amount under banks safeguarding, custodial services, represent merely ten per cent.
This brings in a fresh-risk of losing
colossal funds, most from pension funds, where a big chuck is under
hands of those who are not regulated accordingly.
Due to limited awareness, most portfolio
investors left the duty to safeguard their funds under the hands of
stockbrokers, who in some cases rise conflict of interest on how best to
manage equity and debt funds under their docket.
CRDB Bank Managing Director, Dr Charles
Kimei, said at the moment assets under custodial management is roughly
500bn/-, just a peanut, compared to the total country’s investment
portfolio. “The service is new … the main challenge is awareness and
education to portfolio investors,” Dr Kimei said yesterday during a
half-day sensitisation discussion.
Dr Kimei said they are the first local
bank to introduce the services which at the moment was growing at 32.5
per cent a year in the last five years. According to Dar es Salaam Stock
Exchange (DSE), domestic market capitalization stands at 8.44tri/- as
of Monday, though not in nominal term.
Dr Kimei said outsourcing the portfolio
to banks “cut costs” while at the same time clients get a first hand
information of the proceeds of one investment - include AGMs, dividends,
settlements, share or bond prices and so forth.
“The custodian is the entity responsible
for safekeeping client assets. Banks are mitigating risks associate
with leaving funds under non-bank custodian. “The services are for any
portfolio investor but pension funds are key ones as their exposures are
too high,” Dr Kimei said.
Dhow Financials Chief Executive Officer,
Prof Mohamed Warsame, said using bank’s custodian services avert a
number of risks since brokers are not heavily regulated as banks. “Have
you seen a broke-firm financials? But you have seen several times for
the banks,” he queered.
He said in Kenya, some brokers sold
clients shares, without their consent, when price increases and pocket
the gain, and replaced the share once price plummeted. However, the
problem came up when prices continued to rise, where they could not
replace the shares.
“Four firms collapsed in Kenya due to
these malpractices, where one went under with billions of Kenya’s NSSF
fund,” he said. “The custodian services reports financial position of
their client on daily basis showing position of the investor fund
movement. “Large institutions and some investors choose to have a
custodian relationship that is separate from broker trade execution
services,” Prof Warsame said.
Social Securities Regulatory Authority
(SSRA), Director of Compliance, Lightness Mauki, said total pension
funds investment has reached 10.5tri/- out of which 5.0tri/- are under
portfolio investments. “Yes, still a big potion is not under custodian
but a pension fund can have a special agreement with a brokerage firm on
how best to keep its fund,” Ms Mauki told ‘Daily News’.
Despite Prof Warsame saying there is no a
case where a broker sold client share without an approval in Tanzania,
‘Daily News’ was tipped that some four cases have been experienced in
the past.
“There was a case of a broker sold a
client share without approval. But when we investigate, we found out the
broker died. The firm, to cover the mess, agreed to replace the
shares,” the informer said.
He said most investors, especially
retailer, are buying share to keep, thus giving a leeway for uncouth
broker to capitalize on trading on ones shares and pocket the gains.
DSE Head of Certificate of Securities
Depository unit, (CSD), Benito Kyando, said to beef up securities and
increase efficiency, the bourse figuring out separating CSD unit from
its activities. “In some countries in Africa CSD unit are separate
entity … we want to do the same in Tanzania. CSD should be separated
from DSE,” Mr Kyado said.
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