Ngenye Kariuki offices in Nairobi. The chief executive said last week that they would apply for a trading licence in two weeks’ time. Photo/File
A capital markets regulator’s requirement that Ngenye Kariuki & Company do an audit of its books has delayed the stockbroker’s return to active trading.
Newly hired chief executive of the firm, Davis Gachuba, said that the broker had planned to have resumed trading on the Nairobi Securities Exchange (NSE) this month.
The audit, which Mr Gachuba says was not part of the initially set conditions for a return to the stock market, has delayed the comeback.
“The additional requirement was not part of the (earlier agreed) conditions,” he told the Business Daily.
The Capital Markets Authority (CMA) omitted Ngenye Kariuki from its list of licensees for this year, even after the regulator had lifted a statutory management order slapped on the broker after it fell into financial difficulties.
“We will be awaiting their application for the various categories that they will desire (to apply for),” said the CMA chief executive, Ms Stella Kilonzo, last week.
The CMA had given the stockbroker four conditions for a return to active trading.
The firm was to constitute a new board of directors, who meet the regulator’s corporate governance and market intermediaries’ rules and its management was to agree with K-Rep Bank on restructuring of a loan facility it took.
In essence the K-Rep Bank debenture was to be subordinated to client creditors, a condition which means 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.
Mr Gachuba said that they had met all the conditions but the requirement for a financial audit.
The firm has hired PKF East Africa for the audit and Mr Gachuba said that they intend to make their application for a trading licence in a week or two.
The absence of a trading licence means that the firm cannot earn revenues in the form of commission on executed trades, which is also slowing down recruitment.
Plans are in place to hire researchers and customer service personnel.
So far, Ngenye Kariuki has hired a dealer and an IT administrator. During its statutory management, the CMA staff was running operations.
Ngenye Kariuki was suspended from trading after it ran into financial difficulties, precipitated by fraud from its staff and clients following the 2008 Safaricom initial public offering (IPO).
The change from a manual system to an electronic one left loopholes that exposed brokers to fraud from both within and without the firm.
Shareholders agreed to pump in additional capital into the company to improve the firm’s liquidity and sold a 10 per cent stake to three new investors and over Sh100 million has been pumped into the firm.
Since it went under statutory management, it has seen a slight dip in its client base to about 80,000 clients from 96,000.
