By James Anyanzwa
The planned demutualisation of the Nairobi Stock Exchange (NSE) faces new hurdles after stockbrokers and investment bankers raised new concerns over regulations proposed to guide the process.
This comes after the standoff between the Capital Markets Authority (CMA) and the Kenya Association of Stockbrokers and Investment Bankers (Kasib) over the modalities of demutualising the exchange degenerated into the latter pulling out two of its members from the CMA-led demutualisation committee.
It argued that its members were not fully involved in the restructuring of their own organisation.
The stockbrokers, who are the current owners of the exchange, are now unsatisfied with the 20 per cent shareholding proposed for the government and the Investor Compensation Fund (ICF).
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They are also uncomfortable with the proposal to reduce their shareholding in the demutualised exchange to less than 40 per cent in less than three years.
Surprisingly, their sudden change of heart comes after they resolved during an extraordinary general meeting held in March last year to retain 80 per cent shareholding in the demutualised company for two years and then dilute it to 40 per cent through an initial public offering.
The brokers also agreed to change the name of the demutualised exchange to Nairobi Securities Ltd with an authorised share capital of Sh1 billion and the change in the memorandum and articles of association of the company to reflect the new status. However, according to a draft copy of the minutes of the council of Kasib meeting held on August 11, brokers and investment bankers have now branded the regulations to coerce the Exchange to cede 20 per cent of their shareholding as "unconstitutional".
According to the minutes seen by The Standard, stockbrokers also deliberated whether the 20 per cent threshold to be allocated to the Government and ICF was a minimum or a maximum.
While the proposed regulations 4 (2) (d) provides that the Treasury and the ICF each receive 10 per cent of the shareholding in the demutualised exchange brokers argue that they had approved eight per cent each.
The market intermediaries through their umbrella body Kasib have also raised concerns over the proposed composition of the Board of the demutualised Exchange, saying such a move was questionable and did not reflect the ownership of the Exchange.
In the meeting, which was also attended by representatives from NSE and the Central Depository and Settlement Corporation, brokers resolved that the proposed shareholding allotment to the government and ICF was "unjustified" saying shareholding to be given to the two entities was a ‘gift’ and it was therefore in bad faith to have it in law.