Ngenye Kariuki brokerage in Nairobi. A statutory management order against the stockbroker was lifted in December 2011. Photo/FILE
What you need to know:
The omission marks the third year in a row that Ngenye Kariuki has been denied an operating licence since its placement under statutory management in 2010.
Stockbroker Ngenye Kariuki & Company has been left out of the 2013 list of Nairobi Securities Exchange (NSE) licensees, leaving in limbo tens of thousands of investors who have accounts with the intermediary.
The omission marks the third year in a row that Ngenye Kariuki has been denied an operating licence since its placement under statutory management in 2010.
The latest move raises questions about the health of the stockbroker and casts doubts about its return to the bourse.
Ngenye Kariuki’s statutory management order was lifted in December 2011, but the regulator placed a condition that the broker would have to meet all licensing conditions to gain access to the NSE’s trading floor.
The company is said to have a negative capital balance, which the shareholders have apparently found difficult to raise.
Tuesday the chief executive, Davis Gachubu, said he did not want to “address the Press” on the issue and declined to say whether the broker had complied with the regulator’s requirements.
The stockbroker held an estimated 96,000 investor accounts at the time of collapse, some of which have since been transferred to other brokerage firms with authority of the regulator.
In an interview last year following lifting of CMA’s statutory management order, Mr Gachubu said the regulator had demanded a financial audit of the broker, in addition to four other conditions that were to be met before a return to active trading.
The firm was to constitute a new board of directors, in line with the regulator’s corporate governance and market intermediaries’ rules.
Its management was to agree with K-Rep Bank on restructuring of a loan facility subordinating it to client creditors-— a condition which meant that if the bank decided to call its money, clients’ cash would not be touched.
Finally, Ngenye Kariuki was to hire staff to enable it resume operations smoothly.
These were the conditions prescribed after a CMA board meeting on December 14, 2011, when statutory management was lifted.
The Capital Markets Authority (CMA) had not answered our queries on the matter by the time of going to Press.
Ngenye Kariuki collapsed in 2010 following a theft scandal that included employee fraud, un-authorised withdrawal of investors’ money, poor capitalisation and exceeding overdraft facilities at the bank.
The list of this year’s licensees was released by the CMA includes 10 investment banks and 11 stockbrokerage firms.
Other licensed entities on the list are 20 fund managers, 16 investment advisors, over 50 collective investment vehicles including unit trusts as well as 10 approved Employee Share Ownership Plans.
Franklin Management Consultants, an investment advisor, was given an “extended” licence pending resolution of issues that the regulator did not disclose.
A source not authorised to speak for Ngenye Kariuki & Company, said the firm had only injected about Sh30 million of a required Sh100 million and had therefore not been allowed to operate despite its statutory management having been lifted early last year.
The source said the company had been lagging behind in fulfilling most of the conditions set by the CMA.
“There were many outstanding issues revealed by the audit,” said the source.
Majority shareholder and founder Ngenye Kariuki was also not available to respond as his cell phone was switched off throughout the day.
The source said the CMA may have ordered the audit after it was brought to its attention that something was amiss with the company’s books. The audit included a verification of the new capital injection required by the regulator.
CfC Stanbic Financial Services, Standard investment banks, Barclays Financial Services, NIC Capital, CBA Capital, Equity, African Alliance, Dyer & Blair, Faida and Renaissance are now licensed as investment banks, each of which should meet the minimum capital of Sh250 million.
Others such as Kingdom Securities, NIC Securities, Old Mutual Securities, Suntra Investments Ltd, ABC Capital, Kestrel Capital, AIB, ApexAfrica Capital, Genghis Capital, Sterling, Francis Drummond have been licensed as brokers whose minimum capital is Sh30 million.
