Citibank boss explains IPO refunds delay

Citibank is holding Sh141.6 million belonging to investors who are yet to cash their cheques released after the conclusion of the Safaricom IPO in 2008.

The final reconciliation of the IPO refunds involving one selling agent was done in February 3, 2009 and no questions have been raised by the Capital Markets Authority (CMA) since then, Citibank East Africa chief executive, Ade Ayeyemi, said on Friday.

Mr Ayeyemi was responding to claims from the brokerage community led by the Kenya Association of Stockbrokers and Investment Banks (KASIB) – which has blamed Citi for the uncashed refund cheques and asked for an independent forensic audit of the refund process.

Success rate

“Comparatively, Citi has achieved a higher success rate on the refund distribution than previous IPOs helped by the cheque encashment provided countrywide by the partner banks,” Mr Ayeyemi said when he addressed a press conference at Intercontinental Hotel.

Citibank was the lead receiving agent for the IPO and partnered with National Bank of Kenya, Equity Bank and Postbank to provide a distribution network of over 200 bank branches countrywide.

The role of the lead receiving bank is to collect all funds during the IPO period and then pay the proceeds to the relevant advisors before paying the net sum to the issuer - which was the government. The bank plays no other role but can also use its contacts and network to reach out to prospective shareholders.

It has been waiting for the investors to present the cheques for payment.

There has been speculation that in fact the cheques belong to “ghost investors” invented by some brokers as a way to have multiple access to the Safaricom IPO allocation.

Banned endorsement

But when the Central Bank of Kenya and the CMA banned the endorsement of cheques – where a broker changes the payee of a cheque so the payment is credited to the firm’s name – the brokers found themselves cornered.

They would not go to claim the money because they could not prove the identity of the claimant as indicated on the cheque and the application documents.

Denying that the bank was holding and refusing to pay back any money to investors, Mr Ayeyemi said he could not speculate on the motives behind the constant accusations that his bank was to blame for the unpaid refunds.