Kenya’s Capital Markets Authority (www.cma.or.ke) is giving limited refunds to people who lost money with stockbroker Nyagah Securities which collapsed in 2008. It has also set up a telephone hotline for people to report suspect dealings by stockbrokers or investment banks.
Finance Minister Uhuru Kenyatta was reported in local press and on Reuters last month as saying the total payout will be KSh302 million (US$4.0 million) to over 25,000 shareholders who registered claims by August. It is the first payout from the Investor Compensation Funds (ICF), where payouts are limited to KSh50,000 ($666) per investor.
According to Kenya’s Daily Nation newspaper, remaining investors would only get full compensation if the Government gains KSh120 mln by selling the assets of top management of the failed stockbroker. The CMA is reported to have instituted judicial proceedings to sell property of Nyagah managing director Patrick Gakiavih.
However the newspaper also reported that a forensic report by PricewaterhouseCoopers suggested losses were KSh1.3 bln and criticized the role of the CMA for failing to act earlier on information.
More recently the CMA published hotline numbers in the local press to help people reach its anti-fraud unit. Chairman Micah Cheserem is reported as saying the authority is seeking to reduce fraud and protect investors by getting information promptly.
Two other stockbrokers – Francis Thuo and Discount Securities Limited –also folded in the last three years and the resulting lack of confidence saw Nairobi Stock Exchange (www.nse.co.ke) share prices sink fast. The CMA has been tightening reporting and compliance requirements in a bid to restore health in the capital market.
The compensation move may bring hope to investors who lost funds with Discount Securities Ltd, which is also under receivership.