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Ngenye Kariuki seeks capital injection from investors

Firm was left out of the CMA’s 2013 list of licensees since its placement under statutory management in 2010. FILE
Firm was left out of the CMA’s 2013 list of licensees since its placement under statutory management in 2010. FILE 

Stockbroker Ngenye Kariuki & Company is negotiating with investors for fresh capital injection into the business in an effort to get the market regulator’s clearance for access to the stock market.

The brokerage firm’s founder and chief executive, Ngenye Kariuki, said in an interview on Wednesday he is in talks with both local and foreign investors from South Africa, UK and the US who are interested in buying a stake in the company.

“The negotiations were delayed by the (March 4) elections, now it is over and things are clear, we hope to conclude so that we can re-open the business,” said Mr Kariuki who did not however, reveal their identities citing confidentiality agreements.

Ngenye Kariuki, one of the oldest brokerage firms at the Nairobi Securities Exchange (NSE), was left out of the Capital Markets Authority (CMA’s) 2013 list of licensees, marking the third year in a row that the intermediary has been denied an operating licence since its placement under statutory management in 2010 after reporting financial difficulties.

The statutory management order was lifted in December 2011, but the regulator required the broker to meet all licensing conditions to re-gain access to the NSE’s trading floor.

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Among the conditions was a requirement to inject fresh capital into the business, besides re-organising the management structure.

“The additional capital will depend on the kind of licence that we settle for with the new investor, if we go for investment banking then you’re talking of a minimum of Sh250 million and Sh50 million for stock brokerage,” said Mr Kariuki.

The broker held an estimated 96,000 investor accounts at the time of collapse, some of which have since been transferred to other brokerage firms. 

Mr Kariuki said investors with a portfolio of more than Sh2.5 billion were still holding accounts with the broker.

As part of management restructuring, the broker hired chief executive Davis Gachubu, who Mr Kariuki said has been recruiting new staff in anticipation of a return to the trading floor.

While lifting the statutory management after a board meeting held on December 11 2011 the CMA required Ngenye Kariuki 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 to shield customers’ cash in case the lender recalled the debt. The broker was also required to hire employees to enable it resume operations smoothly.

Mr Kariuki blames his firm’s collapse on the Safaricom IPO, which he says left many stockbrokers in debt after the regulator ordered the intermediaries to pay investors’ refund claims running into hundreds of millions of shillings from their own resources.

Efforts to reconcile the refund claims with Citibank, which was lead transaction advisor for the deal, were abandoned without completion.

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