Regulator warns over saccos’ funds drive

The Capital Markets Authority has faulted the current drive by cooperative societies to raise money from the public without seeking the necessary approvals.

The regulator is warning members of the public from participating in such a move saying they risk being defrauded by cooperative societies that are asking them to buy shares.

In a statement appearing in the press on Friday, CMA said it is alarmed by the number of cooperative societies asking the public to buy shares in exchange for dividend, yet these cooperatives have not sought the approval of the authority.

“The attention of the Authority has been drawn to advertisements running on radio, television, websites and billboards among others, being promoted by various Cooperative Societies inviting investors to buy shares promising returns on investment in form of dividends.

The Authority wishes to caution the investing public that the said offer of shares by these societies has not been approved by the Authority in line with Section 30 of the Capital Markets Act,” the CMA said.

Section 30A of the CMA Act says that “No person shall, in Kenya, offer its securities for subscription or sale to the public or a section of the public unless prior to such offer, it publishes an information memorandum signed by or on behalf of its officers and files a copy thereof with the Authority”.

ANONYMOUS SOURCE WONDERS AT SACCO MOTIVES

An official at the regulator, who spoke on condition of anonymity as he is not authorised to speak on behalf of the authority, wondered why these cooperative societies (Saccos) are keen to by-pass regulatory approval before raising money from the public.

He said the regulator will hold talks with the Sacco Societies Regulatory Authority (Sasra) before the public loses money.

The most conspicuous of the Saccos collecting money from the public is Murang’a Investments Co-operative Society Limited (MICSL), whose Shilingi kwa Shilingi tagline has caught the public eye.

The sacco, an initiative of Murang’a County governor, Mwangi wa Iria, asks members of the public to save as little as Sh35 daily in order to get dividends.

PRECAUTIONARY MEASURES

“The investing public is hence advised to be aware and take precautionary measures,” the CMA said.

“We told them (the Saccos) not to raise funds from the public without approval.

The arrangement is that any capital raising plan from the public should be approved by the CMA,” said the senior CMA official, adding that the purpose is to forestall any risks of the public losing its money in any eventuality.

Sacco Societies Regulatory Authority managing director Carilous Ademba said cooperative societies ought to seek CMA approval before mobilising money from the public.

This, he said, is because Sacco regulations only allow Saccos to raise money from their membership.

However, if they plan to raise money from the public, they must seek CMA approval as it is the responsibility of the regulator to protect the public’s funds.

Adembe said while the Saccos are pursuing a noble cause of “helping in the development agenda”, they ought to be aware of both the Sacco and the CMA regulations to avoid conflicts with the law as they help the public to invest their funds.

“They may not be aware of the conflict within the law and that is why they need to be educated on this,” Mr. Ademba added.

He said Sasra has received a letter from the CMA on the activities of such cooperative societies and the two are scheduled to hold a meeting on the first week of January 2014 to iron out the issue with the concerned parties.

RESTRUCTURE MEMORANDUM

CMA acting chief executive officer, Paul Muthaura, says the authority has engaged the Murang’a Investments Co-operative Society Ltd to see to it that they restructure their memorandum to draw a clear line on how they should raise the funds from the public.

“We are working with them to ensure that they operate within the law. What they are doing now amounts to an offer to the general public, which should not be the case.

Some people (investment groups) may have seen what is happening in the county and may also want to do the same.

But, we want to ensure that they do it in the right way,” Mr. Muthaura said.

Investment groups like Stima Sacco and Muramati Sacco were able to raise money through their own members, without having to seek CMA authority as this is within the mandate of the Sasra to allow them to do so.

“These (Stima and Muramati, which is now Unaitas) did it right as they raised money from their members,” he said.