Third stock broker in trouble
Capital Markets Authority chairman Chege Waruingi (second right) addresses the media accompanied by CMA CEO Stella Kilonzo (right) Nairobi Stock Exchange Chairman James Wagunyu and NSE chief executive Chris Mwebesa. Photo/ FREDRICK ONYANGO
The Capital Markets Authority on Monday moved to forestall the collapse of yet another stock brokerage firm and replaced its executive director.
Discount Securities Limited has been facing financial problems and was placed under the management of auditing firm, KPMG.
The brokerage firm’s executive director, Mr David Githaiga, was replaced. It will, however, continue trading at the stock market as restructuring is carried out.
Among largest
The firm is among the largest, with 20 branches in Nairobi, Mombasa, Kisumu, Thika, Nakuru, Meru, Embu, Mumias, Kakamega, Bungoma, Nyeri, Kisii, Naivasha, Nanyuki, Nyahururu, Kitale, Kericho, Eldoret, Malindi and Voi.
This is the third brokerage firm in which the CMA has intervened following cash flow problems. Francis Thuo & Partners went under last year, while Nyaga Stockbrokers collapsed early this year. Its directors are in court over matters related to its collapse.
Speaking at the Capital Markets Authority offices at Re-Insurance Plaza, CMA chairman Chege Waruingi said: “The CMA and Nairobi Stock Exchange shall be intervening with a view to restructuring Discount Securities Limited through strengthening its corporate governance structures to ensure its business continuity in the interest of capital markets and the investing public.”
The statement was also signed by NSE chairman James Wangunyu.
Prof Waruingi said after enhancing shareholding structure, a strategic partner to inject capital will be sought. He said should additional funds be needed during the restructuring, they would
be made available within “reasonable limits and in form of capital”.
Journalists were not allowed to ask questions at the press conference attended by NSE chief executive officer Chris Mwebesa and his CMA counterpart Stella Kilonzo. The officials were hurriedly ushered out.
The firm’s current chairman is Mr William Murungu, while Mr Allan Simu is a director.
In March, CMA placed Discount Securities under surveillance along with three other firms for failure to meet certain minimum benchmarks.
The others were Solid Securities — which was bought by NIC Capital — Reliance and Crossfield. The firms were given conditional licences, meaning they were to operate for three months under surveillance in order to meet the minimum stipulated requirements.
There have been concerns that some firms were fiddling with their clients’ accounts, trading without instructions, failing to effect instructions promptly or pay the proceeds within the CMA stipulated five days.
Several were also said to be in arrears in remitting statutory dues to NSE, CMA and Central Depository and Settlement Corporation.
Monday’s action is likely to further undermine the confidence in the stock market, now suffering depressed trading with the NSE 20 Share Index last week closing at below 4,000 points, the lowest in years.
But Prof Waruingi allayed fears that the firm had been placed under statutory management.
He invoked Section 33A (1)c and (2)c which allows intervention when the authority discovers any fact of circumstance, which in its opinion, warrants intervention in the interests of the investors.
