Capital Markets

Regulators appoint team to handle Safaricom IPO refunds

citi

Photo/Diana Ngila Citibank building in Nairobi's Upperhill. The bank has said it is holding up to Sh117 million of investors’ funds, which arose from the huge over-subscription of the Safaricom initial public offer (IPO) that targeted to raise Sh51 billion.

A committee comprising officials from Citibank, the banking sector, and capital markets regulators has been formed to find ways of refunding investors who bought shares during the Safaricom IPO.

The team was formed following a meeting called by the Capital Markets Authority (CMA) to resolve the four-year refunds dispute between Citi, the main receiving bank during the share sale and stockbrokers, who were selling agents in the transaction.

Citibank has said it is holding up to Sh117 million of investors’ funds, which arose from the huge over-subscription of the initial public offer (IPO) that targeted to raise Sh51 billion.

The bank has insisted that refunds can only be paid to investors who present full identification documents, but stockbrokers have been calling for a reconciliation to offset payments which they claim to have made directly to investors.

READ: Citibank boss explains IPO refunds delay

Legally viable

“The committee will evaluate all solutions that have been suggested so far and see which one is legally viable,” said a source who attended Tuesday’s meeting.

About 800,000 investors applied for the 10 billion Safaricom shares that were on sale in the 2008 IPO.

Majority of investors collected their refund cheques from the selling agents and presented them to their respective banks for payment, but many retail applicants have not accessed their money yet.

CMA said in a statement that common reasons for the refund delays included lack of support documents by investors, dead applicants, lack of investor awareness, failure to trace the cheques with respective selling agents, long distances to the respective selling agents, wrong or change of applicants’ addresses, and errors on personal identification information on the cheques.

Stockbrokers who spent their money to refund some of the retail investors have called for compensation from Citibank, based on a guarantee that they would settle any claims that may arise in future.

Some of the brokers, like Ngenye Kariuki and Company which was placed under statutory management after experiencing cash flow problems, have said they spent millions of shillings compensating investors in the belief that Citibank would repay them.

Willy Njoroge, the chief executive of Kenya Association of Stockbrokers and Investment Banks (Kasib) — the industry lobby — said brokers would not push to be included on the committee at this stage.

“I think the issues the committee will discuss are those that have been raised by Kasib,” said Mr Njoroge.