Difficulties Changing Nairobi Stockbrokers

Stockbrokers are falling at the rate of almost two a year, and tales continue to abound.

The reality is that, sooner or later, you may need to change your broker and while I’ve had this post for over three years about how simples the process of transferring shares from one broker to another should be, the reality is very different!

Kenyan shareholders have had the option not having share certificates for a few years now. With a central depository system (CDS), you surrender your share certificates e.g 1,000 Kenya airways (KQ), and in exchange get an electronic account/statement which is updated each time you buy or sell, shares. You also get all your dividends and annual reports by mail.

Still to buy and sell shares you have to go through a stockbroker, who ideally should have the same tally as your CDS statement. Recently problems have been had with rogue brokers, who would sell share without informing clients – and clients would only find out when they got a CDS statement showing less shares than what the broker said they had. Later the frauds went even further when brokers would ensure that even CDS statements didn’t get up-to-date records of share sales.

I had to change broker for a company account this week and the reality was much more than. I had a team of people, the transfer was between two viable brokers and we were able to get all the (numerous) documents that were asked for. Yet it still involved almost a dozen trips to the office and took almost two weeks.

The steps taken included
(i)Open an new CDS account with new broker
(ii)Close old CDS account with old broker
(iii)Move shares from old to new CDS account

Documents that were asked for included
– 3 copies of Certificate of incorporation with – one stamped by old broker, one stamped by new broker, one for the CMA (all stamped by company seal)
– Memorandum & articles of association requested by new broker (was not required at old broker so copies had to be traced and photocopied)
– 3 copies of director ID or passports – stamped by old broker, stamped by new broker, one for to the CMA (all stamped by company seal)
-2 copies of form of shares being transferred one called CDS 4A and one called CDS 4B, signed by directors and stamped with company seal. One form must be stamped by old broker, one stamped by new broker
– 200 shillings ($2.50) transfer fee

Now imagine what it is like trying to reconcile accounts, reclaim investments or move from a collapsed stockbroker? Or a fraudulent one? Or one who doesn’t have motivated (paid) staff, or proper records?

Also until last year, IPO’ were considered sure winners – and people would open several accounts e.g. in the name of their mother, grandmother, cousin, maid, driver etc, all in a bid to get more shares after the fractional allocation that characterized Kengen and Safaricom IPO’s, but before the price rocketed up on day one. Many CDS accounts were opened, many by new temporarily hired staff in a bid to get as many applicants in as possible during the limited (IPO’s usually 2 -3 weeks) and some rules were readily relaxed. I explained these to the new broker, but they said CMA can come and audit their files and they have to comply CMA have their hands full with collapsing or non-compliant stocbrokers!

So, finally, the new account is now open, after a very tiring two weeks, during which I confessed that it was maybe better to sell all the shares held at old stockbroker and open a new account at new stockbroker than to attempt to transfer the shares.

6 thoughts on “Difficulties Changing Nairobi Stockbrokers

  1. Anonymous

    I have read the discussion thread at stockskenya with interest as it regards my broker.
    Thank you for the post on how to change brokers


  2. gach

    the change 4the company ac’s is sure length. however you could highlight for personal accounts. where all you need is to open an account with a new broker/Custodian, and then get the 4a signed and stamped by the old broker, and 4b signed by the new one. in 2-3 weeks one can then deal.

  3. Anonymous

    I don’t find this suprising.I also opened 2acts during S/Com IPO. I have closed the one in my bro’s name and managed to collect the money immediately BUT the transfer of share from my bro’s account to my cds account (remember, all with the same broker) has now taken more than a month and still they are not yet trfd!!! Only God knows when they’ll b trfd.

  4. PKW

    For a moment I thought you were working on changing the rogue brokers. Wonder who/what it takes to change them.

  5. Concept

    Banks, Some time ago it was an easy affair transferring from one brokerage to another but nowadays its a painful experience for the simple reason that brokers want to cover their ‘asses’ or so to speak.

    Most of the fraudulent activities have occurred in this area where a third part was able to transfer one’s share and then cash out.

    I am for tighter regulation if that is what will ensure investor confidence is restored.

  6. Anonymous

    great, finally you have exposed on dilema i have,i went to a broker associated with a bank to find out if i could transfer my account to them, since they are my bankers.

    alas,! was given a lenghty procedure, i just thought, my broker hasn’t wronged me yet.why move?????

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