Category Archives: Nairobi Stock Exchange

Snooze and Lose Your Investments: Part II

Centum Investments, which recently announced a record profit, and the end of a seven-year deliberate dividend drought, has been running ads in the newspapers and online, asking shareholders to register their names & details via SMS to ensure that they get their payments on time.

At the same time, Centum has also published a list (PDF), on its website, of shareholders who have not claimed their dividends. The list has about 9,000 names, and that’s a shocking stat, considering that Centum  has about 37,000 shareholders.

No shareholder likes to lose out on a dividend or an investment. And regular shareholders who attend AGM’s have also been aware about resolutions at companies to comply with a legal requirement to  surrender unclaimed assets, including dividends, to the government.

Almost all large public companies, except those which listed recently, list & highlight their liability from unclaimed dividends (owed to shareholders) for many years in their annual reports. But if 25% of Centum shareholders, have not claimed their dividends, totaling Kshs 78 million after almost 8 years, it raises many questions about why this situation exists. But one reason could be that shareholders have been unable to receive their dividends because some companies and their registrars have made it very difficult for shareholders to prove, claim and receive their rightful dividends. lost shareholders

  • $1 = Kshs 100
  •  A  registrar is an institution,  responsible for keeping records of shareholders..and  when an issuer needs to make dividend payment to shareholders, the firm refers to the list of registered owners maintained by the registrar.
  • Centum ads say the registration is free, but normal SMS costs seem to apply.

NSE Goes Android

The Nairobi Stock Exchange now has a free Android app. Developed by Verviant, it is rather basic (download page), but show’s the the equity day’s prices changes, and summary of some announcements. Still, it’s a good start, and should be a work in process, and maybe investors will be able to track their portfolio’s (still empty) and drill down to read more comprehensive announcements, and bond prices too.

The Exchange probably needs to address the issue of large PDf statement that companies fax in their announcements and which the NSE scans to their site – and replace these with some basic documents that they can upload to the main and mobile site.

Another NSE geared app is the Rich app (from the Nokia Ovi Store), that is however designed for the Nokia E-7.

Rules for Kenya Internet Trading

Continuing with the pace of more regulations to strengthen the securities industry in Kenya, the capital markets authority (CMA) has availed at their website even more draft regulations for public discussion that cover internet trading, disciplinary actions, takeovers and licensing. In addition to those rules for public offers they have;

Internet trading
– Kenyan organizations or those which target Kenyan investors need CMA approval
– Source of platforms: they may own, gets from eth exchange (NSE) or use other platforms if CMA approves.
– Those who already have should re-apply – licenses are renewed annually, and are canceled automatically if one stops being stockbroker, network or exchange
– All platforms should Ensure confidentiality, safety of data (no manipulation, virus etc), back up plan, maintain audit trials Encryption and firewalls, Prevent duplication of orders
– Stockbrokers can sponsor chat rooms
– Traders to Report monthly on number of users, transaction averages, and system downtime

Disciplinary Processes
– Proposes creation of disciplinary committee that follows civil law e.g. sharing of evidence, call witnesses, cross-examination
– Committee can warn or censure firms or persons or can suspend or revoke licenses

Take-overs (intended to sort out carbacid-type deals)
– Board of company being targeted for take over must hire an independent financial adviser
– Offeror to make public announcement, if there’s unusual movement in target company share price
– No withdrawal of offers unless the CMA rejects it; also the target company has 3 weeks to decide
– If takeover fails, have to wait at least 12 months before making anther attempt – specifies format of takeover documents and reply documents to be filed with the authorities

Licensing (for securities exchanges, stockbrokers, investment advisors)
– Stockbrokers (share cap 50 million or~$670,000) to disclose their information technology, and comply with ration for overdrafts, borrowings
– Agents can only work with one stockbroker, and may not handle client funds
– Dealers (share cap 20 million or $267,000) to disclose their information technology, and comply with ratios for overdrafts, borrowings and investment portfolio liquidity
– Investment advisers (share cap 2.5 million or ~$33,000) their portfolio may not exceed Kshs 10 million ($133,000) otherwise may have to become fund manager to handle larger business
– Fund managers (share cap 10 million) and Investment banks (share cap 250 million) must also disclose their information technology, and comply with ration for overdrafts, borrowings

send comments to ceoffice@cma.or.ke

Salute to Kenyan Stockbrokers Part I

Salute to Kenyan stockbrokers, investment banks and fund managers, and the capital markets authority (CMA) for their moves to improve transparency at the NSE of late.

When the new rules were announced early this year, few doubted that licensees (especially stockbrokers would comply, but the early signs are good.
One of the milestones was for the publication of financial statements by Collective Investment Schemes, Stockbrokers, Dealers, Fund Managers and Investment Banks twice a year; and this they did, many baring their losses, some with dubious figures or cosmetic summations, and some omitted profit & loss, but which their auditors will hopefully be able to reconcile at the end of the year.

The compliance was notable in that the intermediaries were able to publish their June 2009 summarized financial accounts,

Investment Banks: 100% (missing was Juanco (now Equity IB?), while FCB Capital was only licensed in June 09)
– Stock Brokers: 100% (missing was Discount (collapsed), Bob matthew (is now KingdomSecurities), while African Alliance is now an investment bank)
– Authorized Security Depositories: 100% (all 12 are commercial banks)
– Collective Investment Schemes: 100% (all are fund managers)
– Fund Managers: 94% (missing was Aueros, while African Alliance reported as an investment bank, and amazingly CIC who were licensed in June 09 already complied)
– Investment advisories 10% they are not required by the law to report, but Dry Associates and Tsavo Securities did

The results were harsh (more on that later) as the downturn at the Nairobi Stock Exchange has had a shocking effect on these companies. But they have recognized that and started taking measure in the form of mergers, re-capitalization staff reductions. When the NSE improves, they will reap the dividends. The signs are good for frontier markets and African markets, but the Kenyan political scene is still a cause for concern for the recover of the NSE and its brokers.

Shaking up the Nairobi Investment Scene


Knocking Off Rogue Brokers

The Kenya Capital Markets Authority (CMA) has published new regulations that could knock off customer confidence in any small stockbroker still standing at the Nairobi Stock Exchange (NSE) as they have now become law.

Changes include:
– Sets minimum share capital for stockbrokers at Kshs. 50 million (~$650,000) and investment banks at 250 million (~$3.25 million) some stockbroker are investment banks in name only name
– Agents may work for one stockbroker only and may not handles client cash
– They must use International Financial Reporting Standards (IFRS)for reporting
– They must publish audited accounts and ½ year un-audited accounts in newspapers and also dispaly the same in their branches so by August 09 we should get a clearer picture of who’s up or down
– They must obtain indemnity insurance
– They are to notify the CMA before appointment of executives, directors, and auditors as well as prior to branch openings/closing

Some of the proposal also affects investment funds, fund managers, and pension schemes. They were first proposed two months ago for public review and borrow a bit form existing central banks laws and are much harsher than when first formulated.

Other losers retail investors who lost their money in collapsed brokers (Nyaga, Discount, Francis Thuo etc.), it limits their potential compensation to just 50,000 shillings ($~650)

Winners – newspapers who will see an increase in quarterly advertisements from stockbrokers, investment banks, investment funds, fund managers, and pensions schemes.
– insurance companies (Stockbrokers and investment banks are to obtain professional indemnity insurance worth 5 times their daily average turnover)