NAIROBI, Kenya, Mar 16 – The Capital Markets Authority (CMA) has placed troubled Discount Securities Limited (DSL) under statutory management for six months.
CMA Chief Executive Officer Stella Kilonzo said on Monday that the firm had also been suspended from carrying out any transactions on the Nairobi Stock Exchange for a period of ten days.
“In exercise of its mandate and in a move to protect the interests of customers of Discount Securities Limited, the brokerage firm has been placed under statutory management with effect from today (Monday),” Mrs Kilonzo said adding that Zahir Sheikh and Peter Kahi had been appointed the joint statutory managers.
The CMA had in October last year, appointed KPMG to take over the management of the stockbrokerage firm after it became apparent the stockbroker was facing serious corporate governance and liquidity problems.
The intervention was to allow the directors and management of DSL to restructure the operations of the company through rationalization of expenses, review of the branch network, and disposal of unutilised assets and investments.
The directors of the brokerage firm were also expected to source additional funds through admission of a strategic partner and/or the injection of new capital by shareholders to settle outstanding client obligations and stabilise the business.
Mrs Kilonzo said the decision to place the broker under statutory management, was taken in good faith to protect the interests of investors.
She assured the broker’s clients that their securities were in the safe custody of the Central Depository and Settlement Corporation (CDSC) Limited.
“Investors who have immobilised their securities through DSL and still have shares should be aware that their securities are held in custody of the Central Depository and Settlement Corporation Limited (CDSC) and not directly by DSL,” Mrs Kilonzo emphasised.
KPMG Kenya and the directors of Discount Securities Limited had been running the affairs of the company jointly since and part of its mandate was to determine the viability of the company and provide appropriate recommendations for CMA’s consideration.
However, Mrs Kilonzo disclosed that without additional capital, the business was unsustainable because although rationalisation of expenses has been addressed ‘to some extent’, all other targets including admission of strategic partners and injection of new capital have not been achieved.
This left no option for CMA but to place DSL under statutory management, in accordance with the Capital Markets Act.
Mrs Kilonzo added that the (statutory) managers will take over management, control, and conduct of the business of the brokerage firm to the exclusion of its Board of Directors.
“They will discharge their duties with diligence and in accordance with sound investment and financial principles, with particular regard to the interests of the customers of DSL,’’ she added.
They will also be expected to communicate to customers and creditors of DSL on the procedures for making claims in addition to the mechanisms to facilitate transfer of CDS accounts for investors to other market intermediaries.
Affected customers are also requested to give the statutory manager at least fourteen days before forwarding any claims or lodging any requests for transfer of CDS Accounts.
Meanwhile, CMA has cleared Bob Mathews Stockbrokers to resume trading at the Nairobi Stock Exchange two weeks after it had issued a statement to stop the firm from doing the same.
The stock brokerage firm was cleared after it met all conditions that were required by the Capital Markets Authority for it to resume trading including an injection of an additional Sh20 million in fresh capital.
The Authority had stopped the firm from trading late February or 10 days because it had not been complying with CMA regulations.
“We would therefore like at this point to assure our esteemed clients and stakeholders that all is well at the company since the regulatory authority has given Bob Mathews a clean bill of health following a series of safeguards that have been instituted by the firm to protect itself and clients,” a statement from the firm read in part.