The Capital Markets Authority yesterday moved to assure investors that the securities held under Genghis Capital, a subsidiary of troubled lender Chase Bank, are in safe custody.
On Tuesday, Genghis Capital, which provides stockbroking services, informed its stakeholders and clients that the company could not move funds held under trust in Chase Bank and was thus unable to make payments.
"Please note that payments are currently pending since our unit trust fund received custodial services of Chase Bank," read an email reply signed by Genghis Capital's investment manager and seen by The Standard.
"We are not in a position to move funds until further notice and directive from the Central Bank of Kenya and the CMA." The firm was responding queries from its clients seek to liquidate their investments. Genghis Capital and NIC Capital were the transaction advisors for the Sh10 billion Medium Term Note that Chase Bank floated last year.
The bank's first tranche of the issue was oversubscribed by a whopping 161 per cent, raking in Sh4.8 billion against a target of Sh3 billion. The NSE has since suspended the bond from trading citing a directive from the CMA.
CMA has further confirmed that Genghis Capital could be exposed by troubles currently being experienced by Chase Bank but stressed that there was still no sign of exposure of clients' funds.
"The trustee as well as fund manager of Gencap Unit Trust Funds are assessing the impact of the custodian, Chase Bank, having been placed in receivership and are in the process of developing recommendations for consideration by the regulator on measures to ensure exposure of clients' cash is minimised," stated Antony Mwangi, Head of Public Relations at the CMA.
"The authority notes that the funds and assets held by Chase Bank as custodian do not constitute part of the assets of Chase Bank (in receivership) and therefore the Kenya Deposit Insurance Corporation, (KDIC) is being engaged on the proper handling of the same in the interests of the custodian's beneficiaries," he said.
The CMA had last week issued a statement assuring investors that securities under Genghis were safely under the Central Depository and Settlement Corporation, (CDSC).
"CMA and CDSC would like to clarify that the securities held in the respective CDS accounts by any Central Depository Agent (CDA) including Genghis in respect of customers are in the custody of the Central Depository and Settlement Corporation (CDSC) and not the CDA itself. Investors are therefore assured that their securities are in safe custody," read the statement in part.
Chase Bank was placed under receivership last Thursday following revelations that senior bank officials had lent themselves and their business entities a total of sh16.6 billion and the bank had a further Sh8.7 billion in bad debts.
