Brokers threaten to stop NSE demutualization

By Jackson Okoth

Stockbrokerage have called for the halting of the planned demutualisation of the Nairobi Stock Exchange.

This comes as the April 30 deadline draws closer when the Capital Markets Authority (CMA) is expected to gazette names of all licensees.

"We want all the issues regarding licensing to be finalised before proceeding with any further discussions or actions on demutualisation," said Kenya Association of Stockbrokers and Investment Banks (Kasib) in a letter dated February 28, addressed to the CMA chief executive Stella Kilonzo and copied to all 21 stockbrokers and investment banks.

Conflict of interest

Demutualisation of the NSE is a process that will see the broker-owned bourse open up its ownership to the public.

Proponents of the process see it as the solution to the challenges facing the exchange, which include conflict of interest. In some cases brokerage firms, who are the principal members of the bourse, act as dealers, and fund mangers.

"There is an urgent need to resolve the licensing issues as most members have not complied with either or both of the requirements on shareholding and capitalisation," said Kasib in a statement.

The Kasib council, which held an Extraordinary General Meeting on January, has also appealed for an extension of the period that CMA requires them to comply with the new shareholding and licensing.

The council is seeking for a three-year extension, similar to the period that was granted to the banking and insurance industry.

Kasib is also seeking guidance from CMA on valuation of the four per cent that each of its members has.

"We are of the opinion that this ought to be considered as part of each intermediary’s capital," said the association.

The new minimum capital requirement for stockbrokers and investment banks is Sh50 million and Sh250 million.

In December last year, CMA informed stockbrokers and investment banks that they could apply for their respective licences, the new regulations notwithstanding.

Then in January this year, the Kasib board met with CMA and reiterated the appeal to have an extension of the time for compliance with the new regulations, first introduced in 2009.

It is still unclear whether CMA has approved or rejected this appeal.

" We feel disturbed by the lack of harmony between the regulator and the intermediaries and call upon CMA to address the real issues affecting the industry," said Kasib.

Currently, the NSE exists as a company limited by guarantee but after demutualisation, it will be a company limited by shares.