Association of Retirements Benefits Schemes AGM in Nairobi August 23, 2018. PHOTO | SALATON NJAU | NMG
The Association of Retirement Benefit Schemes (ARBS) wants
investor compensation laws changed to protect individual pension schemes
that invest under nominee accounts.
Nominee accounts are used by brokers to hold shares belonging to clients in order to make trading of those shares easier.
According
to ARBS chairman Simon Nyakundi, pension schemes lost out millions of
shillings in the maximum Sh1 million compensation that was paid out when
Chase Bank was put under receivership with Sh3.89 billion bond to the
name of pension schemes.
Rather than for each scheme to
purchase a bond, many of them opt to put several investments together
under a nominee account to enjoy efficiency and ease of management.
However, this decision came to haunt them when Chase Bank collapsed.
“The law looked at custody accounts as one scheme and so while
an individual investor who put in money directly was getting up to Sh1
million, schemes were getting as low as Sh100 million for being made to
share Sh1 million for a nominee account,” said Mr Nyakundi yesterday
without revealing how much was lost.
Against this backdrop, ARBS is seeking a review in law through Central Bank of Kenya to avert future losses.
“We
are recommending a policy change so that when such a thing happens in
the future, pension schemes should be looked at as individual schemes,”
he said.
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