CMA to tighten unit trusts oversight after investor losses

Guests during a 2018 CMA investor education meeting in Nairobi. PHOTO | DIANA NGILA  

By OTIATO GUGUYU
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Summary

• CMA plans to audit the committees that make investment decisions after they realised some of the funds were being controlled by lone rangers.
• Recent developments where some of the funds reportedly lost billions to collapsed businesses including Nakumatt, Athi River Mining, Chase and Imperial Banks have raised calls for better oversight on where clients’ money is invested by the funds.

The Capital Markets Authority (CMA) has ordered money market funds to disclose in detail where they have invested clients’ cash as well as the terms of those deals following revelations of investment gambles that have lost investors billions of shillings.

CMA acting CEO Wycliffe Shamiah said the regulator plans to audit the committees that make investment decisions after they realised some of the funds were being controlled by lone rangers.

“We have issued circulars clarifying when they do their quarterly fillings to disclose which investments as in classes, for example you do not just make a return saying; Cash, Sh1 billion, we want you to be very specific, what is in deposits, what is in cash. As we review we also ask you to explain more on the terms of those assets as you disclose them,” he said.

“We will go into the investment committees sitting in the fund managers that make those decisions because we can see there are specific decisions left to one individual as opposed to a committee which can have better ideas,” Mr Shamiah said.

Unit trusts in Kenya held a cumulative Sh71.4 billion in assets under management by the end of September 2019, latest data from CMA shows, with 92.4 percent of these assets held in government securities, cash deposits and listed equities.

They make investment decisions with the approval of their trustees but only disclose publicly the broad investment classes rather that the specific instruments such as commercial papers and company stocks that they have taken a position.

Recent developments where some of the funds reportedly lost billions to collapsed businesses including Nakumatt, Athi River Mining, Chase and Imperial Banks have raised calls for better oversight on where clients’ money is invested by the funds.

Amana Capital was recently in the spotlight for stopping its clients from withdrawing their funds after investing Sh275 million, up to 20 percent of its assets in the collapsed Nakumatt Holdings.