SECTIONS

Bourse tames fraud with electronic share certificates

By JAMES ANYANZWA

The Central Depository and Settlement Corporation (CDSC) has completed the conversion of physical share certificates of the first batch of quoted companies. The certificates were converted into an electronic format by September 1. The conversion, also known as dematerialisation aims to minimise fraud and instill investor confidence at the Nairobi Securities Exchange. Amongst companies whose share certificates were converted into electronic form include KenolKobil Ltd, Kenya Airways, Housing Finance and Mumias Sugar Company Ltd. Others are Eveready East Africa Ltd, Longhorn Publishers, Rea Vipingo plantations, Kenya Power TransCentury Ltd, Kakuzi Ltd, Williamson Tea Kenya, Ltd and Kapchorua Tea Company Ltd.

All the physical certificates of the shareholders of these companies ceased to be used as evidence of ownership of shares after August 31. Shareholders still holding paper certificates will also not be eligible for bonus issues beginning September 1.

The CDSC is fast-tracking the conversion of physical paper certificates of shareholders of listed securities into an electronic format. To facilitate the process, all quoted companies at the bourse have been grouped into three tranches. The first tranche was   declared dematerialised on September 1, while the dematerialisation dates for the second and final tranches have been fixed   at October 1   and November 1, 2013 respectively.

Chief Executive Rose Mambo said paper-based trading system has given rise to serious challenges including duplication of shares, loss and mutilation of certificates, signature mismatches and laborious transfer process.

Ms Mambo said the conversion of share certificates into an electronic format would raise the capital market’s profile in adherence to the international best practices.

“Given the heightened focus on risk management in the financial markets globally, the need to eliminate the risks associated with the movement and manual processing of paper certificates is welcome,” she said.

“The enhanced efficiency arising from dematerialisation is expected to encourage more investors to flock to the securities exchange.”

Dematerialisation of share certificates also seeks to reduce the issues of certificate loss, making it easier to transfer and sell shares and reduce the cost of printing the certificates.

According to Mambo the decision to dematerialize all securities quoted at the securities exchange is a game changer and a major step in the country’s capital market.

She said CDSC has back up facilities and procedures to ensure business continuity in the event of a system failure.“ 

This will not only increase the efficiency in the capital markets but also speed with which shares can be turned around while increasing the spectrum of business array that CDSC can engage into,” said Mambo.