CMA threatens to shut down Ngenye Kariuki

By James Anyanzwa

Capital Markets Authority (CMA) will shut down Ngenye Kariuki and Company Stockbrokers, now under statutory management, unless there is an injection of new capital.

The announcement comes amid reports that some creditors have expressed interest in converting their liabilities into equity to give the company a new lease of life.

Mr Micah Cheserem the Authority’s chairman said although the decision by the company’s creditors was "good" it is still not feasible under the current circumstances.

Cheserem said the authority would not shy off closing down the company in order to protect the interest of the investors.

"We want real capital," said Cheserem adding "Converting liabilities into equity is not bad but we want real cash. Our job is to protect the interest of the investors."

"We have received information from some creditors who want to convert their liabilities into equity," said Ms Stella Kilonzo, CMA chief executive.

The two spoke to the press on the sidelines after opening a corporate governance training workshop for the chief executives of stock market intermediaries in Nairobi on Tuesday.

Kilonzo said the process of lodging claims by the company’s investors, customers and creditors began on March 1.

She was, however, non-committal on the revival of the three-and-a-half decade old firm saying it was still premature to tell.

Ngenye Kariuki was put under statutory management for six months on February 5, becoming the latest casualty in a string of failures that struck three other brokerage firms in three years.

This came after the firm was found not to be in compliance with the market regulator’s legal and regulatory provisions with attempts to restructure it bearing no significant fruit.

These include negative working capital, weak financial base, overdrawing clients’ accounts, maintaining a bank overdraft facility above stipulated regulatory requirements, weak corporate governance and internal controls.

Last year CMA extended the company’s licence to give it an opportunity to address its issues.

Although the firm was granted a licence in the belief that it was in discussion with strategic investors to boost its financial position, it was later suspended from trading at the Nairobi Stock Exchange in mid-November last year, after failing to confirm that negotiations were successful.

CMA appointed Wycliffe Shamiah as the statutory manager to trace and preserve any assets of the company.

Kenya Association of Stockbrokers and Investment banks (Kasib) reacted angrily to CMA’s decision saying the action was unjustified.

"What should surprise any observer though is that there appears to be no evidence to support the conclusion that the firm is unable to meet its obligations," said Jane Njeru, Kasib chief executive in a statement last month.

The closure of Ngenye Kariuki was a huge setback to a market trying to come to terms with the collapse of three other brokerage firms — Francis Thuo and Partners Ltd, Nyaga Stockbrokers Ltd and Discount Securities Ltd.