NSE investors get verbal caution

February 13, 2009

, NAIROBI, Kenya, Feb 13 – The Kenya Association of Stockbrokers and Investment Banks (KASIB) is cautioning investors against making verbal sale and buy orders for shares.

In a statement sent to the newsrooms, the association said it had been keenly following reports being circulated in sections of the media concerning fraudulent activities implicating some of its members.

“Our attention has been drawn to a growing number of cases involving clients issuing verbal instructions to employees working for stockbrokers and investment banks, while executing buy or sell orders. Though this has been a common practice, our advice is that from now on, all orders must be written and the CMA Act followed to the letter,” the statement read in part.

The statement further clarified that the CMA Act states that any licensed person, broker or dealer shall not transfer any securities without the customer\’s written consent.

“It is, therefore, upon an investor to ensure that all dealings with the broker or authorised agents is in written form, to ensure protection in the event of fraudulent activity on the central depository system (CDS) account.”

The Association blamed the present difficulties facing a few stockbrokers on the Safaricom IPO, whose process is yet to be concluded more than six months after the shares begun trading at the bourse.

“While attempts have been made at doing accounts reconciliations with Citibank, the principal receiving bank, the process has been slow and cumbersome. The expeditious conclusion of this reconciliation process will enable stockbrokers and investment banks to receive the IPO refunds and restore their liquidity positions.

Meanwhile, KASIB has announced the formation of a joint committee with the NSE, to look at the possibility of establishing a unified back office platform, which will be integrated online with both the ATS and the CDS.

“We believe that this will ensure an audit trail is enabled within the system, to lock out fraudsters and insider dealings within the stock brokerage firms,” the association said.


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