By James Anyanzwa
Investors who lost money through the collapsed Discount Securities Ltd (DSL) will each be entitled to
CMA Chief Executive says compensation should inject optimism and enhance investor confidence in our capital markets-owned bourse to the public. [PHOTO: FILE/STANDARD] |
This comes almost three years after the stock brokerage firm was put under statutory management over corporate governance and liquidity problems.
The Capital Markets Authority (CMA) said the compensation process would run for six months with effect from February 8 to August this year.
"All genuine claimants are expected to have presented their claims within the set period," said Stella Kilonzo, the Authority’s chief executive.
Kilonzo said the investors would be paid out of the Authority’s Investor Compensation Fund (ICF), noting that the compensation process would be undertaken in phases with the objective of settling the majority of claims as soon as possible.
CMA procured the services of Co-operative Bank Group to help serve investors seeking compensation. This is expected to provide a countrywide platform for the processing and payment of claims. Kilonzo said Co-op Bank has a countrywide branch network hence clients will be in a position to access their funds at the branch nearest to them.
Enhance confidence
"This compensation should inject optimism and enhance investor confidence in our capital markets," she said.
"In the first phase of the compensation exercise set to start on February 8, investors will be paid a maximum compensation amount of Sh10,000, with the balance payable in the second phase of the compensation process," Kilonzo said in a statement yesterday.
She said claimants are expected to lodge their claims by completing claim forms, which shall be provided together with the account opening forms. The Authority however declined to divulge more information regarding the maximum compensation for each investor, the amount and value of the total claims.
Francis Thuo and Partners went under in early 2007, marking the first of a series of stockbroker failures that were largely blamed on weak management, and fraudulent selling of investors’ shares by the intermediaries.
Nyaga Stockbrokers faced the same fate in 2008, followed by Discount Securities in 2009, and in 2010 Ngenye Kariuku was put under forced management. Victims of Nyaga Stockbrokers, were only compensated up to a maximum of Sh50,000 each, regardless of the value of the lost investment. The broker collapsed with Sh1.3 billion worth of investor funds.
Annual report
CMA’s investor Compensation Fund (ICF) revenue reserves dropped by over 50 per cent during the financial year ended June 30, 2010. According to the Authority’s annual report (2010), the fund’s revenues fell to Sh193 million, from the previous year’s Sh424.8 million, prompted by hefty compensation to the collapsed Nyaga stockbroker’s investors, and a drop in public issue fees.
Payments to investors of Nyaga stockbrokerage forked out Sh281.8 million of the fund’s revenues, while earnings from public issues declined by 91 per cent to Sh12.8 million from Sh156.7 million the previous year.
