African Alliance Investment Bank has notified regulators and clients of intention to exit stockbrokerage in the wake of a sharp decline in transactions.
The move by the firm, which acquired the broker's licence through takeover of Kenya Wide Securities in October 2002, could to lead to loss of stockbroker jobs.
The company said it was only ceasing stockbrokerage but would continue with its other businesses including investment banking and fund management which includes collective investment vehicles. Stockbrokers have seen a major decline in earnings with the fall in the prices of shares upon which their income is based.
The Nairobi Securities Exchange (NSE) 20 share index has for example fallen to levels last seen in 2003.
“The company regrets to inform our stockbrokerage clients that as a result of structural decline in the agency trading model in both the local and global financial markets, the company has decided to divest from and cease stockbroking activities,” said African Alliance in a media notice on Monday.
“We therefore notify all stockbrokerage clients of the company and the general public that the company will also cease to act as a stockbroker on the Nairobi Securities Exchange and as a central depository agent,” it said. The firm is incorporated in tax havens including Mauritius and the Isle of Man.
“We further notify our stockbrokerage clients to contact the company urgently to enable them [to] transfer their central depository system accounts (CDS account) to another stockbroker of their choice. This will also enable company to refund cash balances [where applicable] in stock broking accounts to respective stockbrokerage clients. This exercise will take place between June 22 and July 22 2020,” said the company. It advised clients to transfer their accounts, failure to which the company would itself select another stockbroker to move the account to.
“If your shares holdings in your CDS account, document of title to shares or cash balances in your stockbroking account are not transferred to your stockbroker of choice of for cash balances you have not provided instructions on how the cash should be handled by July 22, 2020, the clients assets will be transferred to another licensed broker selected by the company...”