NAIROBI, Kenya, Sep 24 – Clients who had invested in the Nairobi Stock Exchange (NSE) through the defunct Nyaga Stockbrokers will receive Sh302 million as compensation beginning next week.
Finance Minister Uhuru Kenyatta said on Thursday that the money would be used to pay a maximum of Sh50, 000 to about 28,000 investors who filed genuine claims last year.
“These investors will receive cheques through their respective postal addresses and they can present them for payment from September 28. I’m happy to report that 90 percent of investors (25,135) who lodged genuine claims and who are indeed small investors will be fully compensated,” said Mr Kenyatta.
Investors wishing to encash their cheques over the counter will be served through any Equity Bank branch.
They have been advised to carry a national Identification Card, any Central Depository and Settlement Corporation (CDSC) statement received for the respective the Central Depository Corporation account and any internal statement received or any payment receipt issued by the stockbroker.
Of the 27,879 clients, only 2,744 had invested over Sh50, 000 with the collapsed broker. Although they will receive Sh137 million (out of the Sh302 million), they will largely have to wait until the assets of the stockbrokerage are liquidated.
Total claims amounted to about Sh1.3 billion and it was widely believed that the government would be forced to use the tax payers’ money to compensate the investors.
The Sh300 million has however been sourced from the Investor Compensation Fund making it the first time that investors are being compensated from the kitty.
It is currently being managed by the Capital Markets Authority (CMA), but there are plans to have it run by a professional team.
“Steps are being made to operationalise the Investor Compensation Fund Board to take over the administration of the Fund,” said Mr Kenyatta.
The Fund was established under the CMA Act to compensate investors who suffer losses resulting from failure ‘of a licensed broker or dealer to meet his contractual obligation.’
The CMA is seeking to have the Act amended to enable it to pay more than Sh50,000 which is the maximum amount that can be paid to any investor from the fund.
Investigations are going on in another brokerage firm Discount Securities which is currently under statutory management to determine how much will be paid to their clients.
Discount Securities was placed under statutory management for six months after it became apparent that the stockbroker was facing serious corporate governance and liquidity problems.