Investment banks get CMA’s word on privatisation deals
Capital Markets Authority acting CEO Paul Muthaura (left) with Nairobi Securities Exchange boss Peter Mwangi during the launch of the Financial Reporting Awards at the Sarova Stanley hotel in Nairobi on July 5. Photo/Salaton Njau
The capital markets regulator has moved to calm investment bankers’ fears that they will be locked out of privatisation deals under proposed amendments to the Capital Markets Act.
The Nairobi Securities Exchange (NSE) had lobbied MPs to drop the amendments in a presentation made last week to Parliament’s Committee on Finance, Planning and Trade, arguing that the proposed changes to the definition of investment banks would effectively remove privatisation as one of the roles played by the market intermediaries.
“If this amendment is passed, existing investment banks will be excluded from privatisation projects, opening the door for foreign based firms to take over our fledgling capital markets,” said NSE in a presentation to the MPs.
“It will also cause confusion as it will mean those already involved will have to cancel existing contracts with the Privatisation Commission.”
In a response to the Business Daily queries on the issue, however, the Capital Markets Authority (CMA) said the objective of this amendment is to merely remove ambiguity in the definition of investment banks, and that there is no intention to constrict the activities that they are licensed to undertake.
“The investment banks will continue playing a leading role in the privatisation of government agencies. In any case, with the new products coming to the market, the authority appreciates that the existing market players will take the shortest lead-time to offer services in respect of these new products,” said CMA in a statement.
Further, the regulator noted that the Capital Markets (Securities) (Public Offers, Listing and Disclosure) Regulations 2002 was amended in 2009 to specifically highlight the role that investment banks are expected to play in the issuance of securities to the public, including but not limited to instances of privatisation.
The NSE had raised concerns before Parliament that with the changes proposed in the Capital Markets (Amendment) Bill 2013, the existing privatisation deals would have to be cancelled at a great expense to the government.
In the primary CMA Act, an investment bank is defined as a non-deposit taking institution licensed by the authority to advise on, among other deals, the privatisation of companies listed or to be listed on a securities exchange.
However, the Amendment Bill proposes the deletion of the words “privatisation of companies listed or to be listed on securities exchange”.
NSE vice chairman Bob Karina, who is also the chairman of Faida Investment Bank, said any regulation that keeps investment banks from privatisation deals would shut them out of one of their income streams, while at the same time insisting that proper consultation on the issue was not done.
“The issue is that members of the NSE feel that they were not consulted, and if the regulator had done so we would have sought the explanation on this matter, to find out who would be responsible for handling the transactions,” said Mr Karina.
The CMA however provided records that showed stockbrokers, investment banks and other stakeholders were involved in consultations that resulted in the proposed amendments.
From the issues raised by the NSE, the committee had said that it had learned during the sitting that the Bill was drafted without involvement of key stakeholders like the NSE, which would be unconstitutional.
On the new laws on futures market from which the NSE has sought a five year exemption, CMA sought to show that there were proper consultations done with the NSE and other market players including some investment banks on the issue.
CMA details indicate that a series of meetings were held in February and March with stakeholders, including the NSE, and that there was correspondence between the two institutions in April and May on the futures markets culminating in a meeting on May 24 to discuss its overall policy.
Further, CMA said, there was a request for public views on the futures markets published on daily newspapers on May 2.
