CMA and bourse to set up unit to police struggling companies

The trading floor at the Nairobi Securities Exchange. Investor confidence in the equities market is waning. [File, Standard]
The Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) have announced plans to set up a unit to monitor the performance of troubled firms.

The establishment of the Recovery Board is meant to protect investors in the event the firms go bankrupt. This comes even as the Nairobi bourse continues to record the worst performance in almost a decade, with almost a dozen listed firms announcing profit warnings in the past financial year.

“In order to enhance investor protection, the exchange and authority are jointly proposing the establishment of a Recovery Board at the exchange on which securities of an issuer who is technically insolvent, non-compliant with any other listing obligation or whose operations are being conducted in a manner that is prejudicial to the interest of investors or market integrity can be temporarily listed,” said CMA in a notice yesterday.

CMA and NSE hope that setting up recovery boards across all the market segments will provide more transparency on the activity of listed firms.

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“This will allow companies to develop and implement recovery plans and/or to ensure full compliance with the requisite listing obligations and/or such other conditions as may be imposed by the authority while ensuring transparency to the investing public on the status of the entity,” said CMA.

Companies will have six months to submit a restructuring plan to the CMA upon being listed with the recovery board or risk being delisted. Failure to report on the progress of the restructuring plan to the regulators or lack of progress in restructuring within a three-year period will also lead to delisting.

Last month, NSE Chief Executive Geoffrey Odundo said trading at the bourse had come under significant headwinds over the past 12 months largely due to foreign investors in Europe and North America shifting their focus to their respective domestic markets.

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He also cited waning confidence in the equities market.

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CMANSERecovery Board