NAIROBI, April 7 – Kenya could have an Over the Counter (OTC) market by early next year, if the findings of a study commissioned by the Capital Markets Authority is anything to go by.
The study has revealed that 90 percent of respondents were in favour of the establishment of an OTC market, which will allow non listed companies to raise funds from the public by selling their shares.
Mirie Mwangi of Vas Consultants said 72 percent of the respondents were aware of an informal OTC market in the form of share transfer and proposed this as a justification for the establishment of this market.
The report further recommends a minimum paid up capital of Sh10 million for a company to be eligible to list in this market, with listing application fees at 0.03 percent of the market value of the shares to be listed.
“The listing fees charged in the OTC market are generally lower than the fees charged in the main market, so our recommendation therefore is that the listing fees should be lower than those charged in the current securities market at the NSE,” said Mwangi.
He added: “Our recommendation is that they should be generally at least 50 percent.”
CMA Chairman Professor Chege Waruingi said OTC as a window for exit mechanisms for venture capitalists has received a lot of attention, thus the need for the Authority to look into it.
Meanwhile, he said the CMA was working on introducing stringent measures in a month’s time that should reduce systemic risk in the market place.
Waruingi said the legal and regulatory framework is under review to make it robust and facilitative, to address emerging issues including governance and malpractices amongst market operators.
Adding that demutualization of the NSE is one of the proposed ways of making the Authority more effective, Waruingi said the CMA received NSE’s report on the proposed demutualization on Friday last week and would propose that recommendations in this report be combined with a previous one that CMA had commissioned last year, for implementation.
“We are saying let the next study be presented and from there lets come up with a timetable on demutualization, since we haven’t been down that route before.”
He said CMA would like other stakeholders to participate in the process.
Among the recommendations in the CMA study that was carried out by KPMG was that the government should not be involved in trading at the stock market.
“Can we look at the CMA study, look at the NSE study, and try to harmonise these two… We can debate them and come up with a time frame on how this should take place,” he said.
“My feeling is that we shouldn’t rush into it.”
While compiling these reports, the securities of 10 countries were reviewed.