Murang’a Governor Mwangi wa Iria at a road construction site in his county. After an investment plan in Murang’a generated a lot of heat, the CMA is now working on rules to guide counties’ share drives. FILE
What you need to know:
Capital Markets Authority reiterates groups must get authorisation or operate as unit trusts.
The Capital Markets Authority (CMA) is planning new rules setting out ways that counties can use to collect cash through investment schemes.
Acting CMA chief executive Paul Muthaura told the Business Daily last Friday that the markets regulator is working with the National Treasury to come up with a policy for county-based investment schemes.
The new rules would be a boost to schemes such as the Murang’a County Shilingi kwa Shilingi scheme, which has been collecting cash from members of the public in the county, but has faced questions on the legality of its steps.
“We are putting together a steering committee which will also have representatives from various ministries and the counties. With a policy in place, the counties will be able to raise money in that manner without risk of falling foul of the law,” said Mr Muthaura.
The CMA head reiterated the regulator’s position that collective schemes offered by counties and which are open to all members of the county are public offers that require authorisation from the authority.
Mr Muthaura said, currently, registered collective investment schemes can collect money under unit trusts while co-operative societies are limited to raising funds from the membership.
CMA issued a series of warnings in January to the public, cautioning against buying shares in co-operative societies since they are being issued without the regulator’s approval.
The market watchdog said that the offer of sale of the shares has not been approved by the authority in line with Section 30 of the Capital Markets Act.
The CMA Act requires that any entity seeking to do a public share publish an information memorandum that has been filed with, and approved by, the authority.
This position was backed by the Sacco Societies Regulatory Authority (Sasra), which said that savings and credit co-operatives know about the regulations.
“They are well guided on issues of capital raising, including provisions of section 30A(2) of Capital Markets Act 2012; the guidance was issued in 2012 and copied to CMA after saccos started raising capital through share drives and promotions,” an e-mail response by Sasra to Business Daily read in part.
The Murang’a County scheme is currently seeking to raise Sh3 billion for infrastructure projects in the county via the drive dubbed shilingi kwa shilingi, a programme where members can save Sh35 per day or Sh1,000 per month.
A disclaimer on the co-operative’s website states the initiative is a co-operative-based resource mobilisation platform and not a public offer of shares.
Sound management
The scheme which is championed by Murang’a governor Mwangi wa Iria has generated a heated debate within the county, with opposition coming from the County senator Kembi Gitura and Women representative Sabina Chege.
The governor has defended the scheme, saying that investors’ money will be protected and that there are sound management structures to sustain the project.
Mr Muthaura said on Friday that the CMA was open to working with the co-operatives in order “to regularise what they wanted to do.”
He said that the CMA shared some of its findings from its investigations on the scheme with the Murang’a County Assembly, which carried out its own investigations and later raised questions about the scheme.
The assembly which was initially opposed to the scheme has also softened its stance, basing this on the potential of the co-operative to spur development.
The county assembly has, therefore, asked the society to sort out the fund raising question with the CMA and streamline its management and structures.
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