Investors queue to collect their refund cheques for the Safaricom IPO at the Moi Avenue Co-op Bank days after the IPO was declared oversubscribed. CMA is now talking to selling agents to trace owners of unclaimed refunds.
The Capital Markets Authority (CMA) has restarted efforts to resolve the Safaricom IPO refunds dispute by holding meetings with arrangers of the multi-billion-shilling transaction.
On Tuesday, the market regulator was scheduled to meet Citibank, the main receiving bank for the share sale, which was concluded nearly four years ago.
Citibank is said to be holding between Sh100 million and Sh1 billion of investors’ refunds, which it has declined to release, demanding proper identification documents from claimants.
“We have scheduled a meeting with all the parties involved,” said the CMA in a statement. “Because this issue is multi-sectoral, the authority has held consultations with the other stakeholders including Citibank, the selling agents and the Central Bank of Kenya.”
The Safaricom initial public offering (IPO), which was seeking to raise about Sh51 billion, attracted applications many times over the targeted amount, leaving stockbrokers and the receiving bank with a huge backlog of investor refunds.
The Business Daily could not ascertain whether Tuesday’s meeting took off, though Citibank had said that it was set to meet the regulator in the afternoon, and promised to respond to our queries after the meeting.
The Kenya Association of Stockbrokers and Investment Banks (Kasib) CEO, Willy Njoroge, however said members had not been invited to the meeting with the regulator.
The CMA said Citibank, which has over the years resisted calls to release the IPO refunds to stockbrokers, was bound by agreements signed with the selling agents.
“Due to the matters of confidentiality and securing the funds, it was only fair that the refund cheques were drawn in the names of the respective applicants to deter fraud,” said the regulator.
Majority of applicants for the Safaricom shares collected their refund cheques from their selling agents and presented them to their respective banks for payment, but many retail applicants have not accessed their money.
The CMA said common reasons for the refund delays include lack of support documents, dead applicants, lack of investor awareness, failure to trace the cheques with the 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.
“This has resulted in stakeholders seeking alternative options of ensuring that legitimate claimants are traced and payments processed, (some) stakeholders have proposed that global cheques be drawn in names of selling agents who can trace their clients and compensate them since they can easily identify them.”
Backlog
Mr Njoroge said the refund backlog pushed many stockbrokers into cashflow difficulties.
He cited the case of Ngenye Kariuki, a stockbrokerage firm that was placed under statutory management after experiencing financial difficulties, arguing that “90 per cent of its problems were from the Safaricom IPO.”
The firm’s CEO and majority owner, Ngenye Kariuki, had said at the time that his company was put under management that he spent millions of shillings paying out Safaricom IPO refunds believing that he would recover his money from Citibank.
The market regulator, however, says the nature of private contracts entered into at the time of the IPO makes it difficult for stockbrokers and Citibank “to piece up information relating to all the claims either themselves or on behalf of their clients.”
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