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Slow court process in Kenya impeding war on rogue stockbrokers

NEWS
By Jackson Omondi Okoth | May 26th 2015

Confidence among retail investors remains subdued at the Nairobi Stock Exchange (NSE).

This follows failure to prosecute individuals behind collapse of several stock brokerage firms that went under with cash belonging to the public.

The suspects who brought down Discount Securities, Nyaga Stockbrokers, Ngenye Kariuki and Francis Thuo and Partners, are still free and none of those suspected have been prosecuted.

“It takes more than six years for the court process to conclude a case like that touching on stockbrokers and this is not unique to Kenya. We are still hopeful that those found culpable will be prosecuted,” said acting Capital Markets Authority (CMA) Chief Executive Officer Paul Mathaura.

He made the remarks recently while addressing a media training workshop at Strathmore University. “We have the necessary legal instruments and provisions to deal with malpractices but are equally frustrated by a slow court process.”

“There is very little we can do when the matter is before court,” noted Muthaura.

Investors who lost their money when Discount Securities went under are required to lodge their claims for compensation by end of June this year, a three months process that began in April, 2015. CMA has said that investors who fail to submit claims by June 30, 2015 will forfeit their claims.

Further, those who would not have transferred their shares by June 30 this year will have their securities deemed as unclaimed and these may be transferred to the Unclaimed Financial Assets Authority .

“While the general law applies when dealing with cases of fraud, it is difficult to prove a broker sold shares without authorisation and gathering this evidence can take years. However, CMA can apply its own sanctions against suspected persons, without going through the court process,” said Sterling Investment Bank Managing Director John Kirimi.

Discount Securities is still under statutory management while Francis Thuo and Partners was bought by Equity Group in August 2013. Investors who lost cash in Nyaga Stockbrokers have been paid while Ngenye Kariuki is yet to resume trading despite lifting the receivership.

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