{"id":461286,"date":"2011-07-15T04:55:23","date_gmt":"2011-07-15T04:55:23","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/"},"modified":"2011-07-15T04:55:23","modified_gmt":"2011-07-15T04:55:23","slug":"collapsed-brokers-get-nse-shares-ahead-of-public-sale","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/","title":{"rendered":"Collapsed Brokers Get NSE Shares Ahead of Public Sale"},"content":{"rendered":"
\n
\n
\n

Business Daily<\/a> (Nairobi)<\/p>\n

Moses Michira<\/p>\n

13 July 2011<\/p>\n

\n

Stockbrokers have reserved large portions of the Nairobi Stock Exchange (NSE) for collapsed rivals in a move that could see them rake in billions of shillings when the bourse is sold to the public early next year.<\/p>\n

A legal document drafted by the brokers’ advisers shows that each of the NSE’s 21 intermediaries – whether operational, in receivership or collapsed – has been allocated one million shares worth millions of shillings.<\/p>\n

The decision leaves collapsed Shah Munge, Nyaga, Discount Securities and Ngenye Kariuki (in receivership) with equal stakes as their operating counterparts and values the NSE at Sh76 billion.<\/p>\n

Hamilton & Mathews, the brokers’ legal advisers have also changed the identity of the bourse to a limited liability company, shielding its owners from losing any property that is not directly linked to the collapsed firms.<\/p>\n

Ring-fencing owners of brokerages from incurring liability beyond what directly belonged to the firms is particularly expected to spark outrage amongst investors who lost millions of shillings with their collapse but will not be able to make any claims beyond the statutory maximum of Sh50,000 that the market regulator CMA has paid them.<\/p>\n

CMA did not respond to questions on the matter.<\/p>\n

The NSE plans to sell shares to investors in an initial public offering (IPO) — a process that will remove the market’s ownership from the firm grip of the brokers.<\/p>\n

The share auction, also known as demutualisation, offers the brokers a chance to rake in billions of shillings from the sale of the more than Sh1 billion worth of stakes that each of the 21 players has been allocated.<\/p>\n

Stockbrokers made the decision on share allocation at an extra-ordinary annual general meeting held last Wednesday and also approved the renaming of the firm as Nairobi Stock Exchange Limited.<\/p>\n

James Wangunyu, the chairman of Standard Investment Bank, said equal allocation of shares to the 21 brokers was informed by the none could stake a claim to having played a bigger role in the market’s development than its rivals.<\/p>\n

“Some members are suspended from operating as brokers but still are shareholders,” said Mr Wangunyu. “It would be impossible to measure the contribution of each member in the development of the market,” he said.<\/p>\n

Under the agreement that shareholders approved at the extra-ordinary general meeting, every member of the NSE is to be allotted million shares in run up to the share sale.<\/p>\n

The legal advisers also got the owners’ approval to de-register the NSE in its current state, and register it afresh as a privately-owned firm under the Companies Act.<\/p>\n

“The change in registration is the first step towards demutualisation,” Mr Wangunyu said.<\/p>\n

The plan is to split the new NSE into 25 million shares and allocate 80 per cent of the total. The Treasury is to share the remaining 20 per cent stake with the Investor Compensation Fund.<\/p>\n

The shareholders also agreed that the new ownership structure will not consider current or past market-share of individual firms – clearing one of the biggest obstacles to the sale of shares.<\/p>\n

Large stakes<\/p>\n

The market intermediaries have in recent months sharply disagreed on how to allocate ownership as big players sought large stakes of the market citing their contribution its growth and profitability.<\/p>\n

This latest agreement is being seen as amounting to a major victory for the suspended brokers, some of who have been in the cold for up to nine years, and a loss for the top five brokers commanding more than half of the total volumes at the NSE.<\/p>\n

The NSE has seen more than four market intermediaries collapse in a succession starting with the 2002 suspension of Shah Munge over irregular transfer of clients’ shares occasioning the National Social Security Fund Sh251 million loss.<\/p>\n

The list of brokers who have collapsed or gone into receivership includes Francis Thuo, Nyaga, Discount Securities and Ngenye Kariuki.<\/p>\n

Most went down under the weight of heavy debts that rendered them unable to meet their financial obligations.<\/p>\n

Though imprudent market decisions were partly to blame for the collapses, insider fraud, including the drawing of fake cheques, alteration of ledger entries and printing of forged share certificates have also been cited as reasons for the collapse.<\/p>\n

Discount Securities, with more than 80,000 investors to its name collapsed in 2009 – in what has been attributed to irregular dealing in client shares and staff pilferage.<\/p>\n

Under the current ownership structure, only members of the NSE, who are also the joint owners, can trade shares on behalf of clients – an arrangement that has been blamed for the high incidence of fraud and irregular trading.<\/p>\n

CMA is yet to fully compensate investors who lost money estimated to be more than a billion shillings in the collapsed brokerage houses.<\/p>\n

Capital markets laws only allow investor compensation up to a ceiling of Sh50,000 per person.<\/p>\n

CMA says it has fully compensated investors who bought shares through Francis Thuo the broker it placed under statutory management in 2007. Directors and staff of the company have been charged with issuance bouncing cheques and unauthorized dealings in investors’ shares but the case is yet to be determined.<\/p>\n

In the last financial year, the investor fund’s revenues shrank by more than half to Sh193 million as earnings from key revenue streams such as penalties and fines declined.<\/p>\n

But, this could be different should the CMA be allocated a portion of the proceeds in a similar manner as the 2009 incident where it moved Sh150 million from the proceeds of the sale of Francis Thuo’s seat to the investor compensation fund.<\/p>\n

Moscow-based Renaissance Capital had acquired the seat at Sh251 million as it sought a trading seat at the NSE- a value that has since been widely used as the tentative value of membership at the bourse.<\/p>\n

It remains to be seen whether the ICF can claim part of the proceeds once the shares are allotted but investors who suffered losses may be further alienated by the knowledge that those responsible for the collapse of the firms with millions of shillings will be harvesting billions from the share sale.<\/p>\n

Jimnah Mbaru- a past chairman says the stock market’s value exceeds Sh6 billion, even without factoring in the new business lines that the bourse is now exploiting for income generation such as data vending.<\/p>\n

Mr Mbaru said in a past interview with the Business Daily that though there had been no independent valuation of the NSE, different methods of valuing a company easily showed a sharp rise in its worth as the market got more sophisticated.<\/p>\n

Though Mr Wangunyu acknowledge that the respective brokers should be accountable for losses investors may have suffered, he believes that it is the industry regulator who has the last call on the subject of compensation.<\/p>\n

His views were echoed by Tavaziva Madzinga, managing director at Old Mutual- the firm that entered the NSE through the acquisition of a majority stake in Reliable Securities last year.<\/p>\n

“CMA will dictate how the stakes of the collapsed brokers in the NSE will be treated,” said Mr Madzinga while acknowledging that all members will have an equal share allocation.<\/p>\n

<\/p>\n

\nMore News on allAfrica.com<\/strong><\/legend>\n<\/fieldset>\n

AllAfrica – All the Time<\/p>\n

\n<\/div>\n<\/p>\n

Visit site:
\nCollapsed Brokers Get NSE Shares Ahead of Public Sale<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Business Daily (Nairobi) Moses Michira 13 July 2011 Stockbrokers have reserved large portions of the Nairobi Stock Exchange (NSE) for collapsed rivals in a move that could see them rake in billions of shillings when the bourse is sold to the public early next year. A legal document drafted by the brokers’ advisers shows that each of the NSE’s 21 intermediaries – whether operational, in receivership or collapsed – has been allocated one million shares worth millions of shillings<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-461286","post","type-post","status-publish","format-standard"],"yoast_head":"\nCollapsed Brokers Get NSE Shares Ahead of Public Sale - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Collapsed Brokers Get NSE Shares Ahead of Public Sale - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"Business Daily (Nairobi) Moses Michira 13 July 2011 Stockbrokers have reserved large portions of the Nairobi Stock Exchange (NSE) for collapsed rivals in a move that could see them rake in billions of shillings when the bourse is sold to the public early next year. A legal document drafted by the brokers' advisers shows that each of the NSE's 21 intermediaries - whether operational, in receivership or collapsed - has been allocated one million shares worth millions of shillings\" \/>\n<meta name=\"twitter:creator\" content=\"@ghanamma\" \/>\n<meta name=\"twitter:site\" content=\"@ghanamma\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/\"},\"author\":{\"name\":\"\",\"@id\":\"\"},\"headline\":\"Collapsed Brokers Get NSE Shares Ahead of Public Sale\",\"datePublished\":\"2011-07-15T04:55:23+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/\"},\"wordCount\":1212,\"commentCount\":0,\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/\",\"url\":\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/\",\"name\":\"Collapsed Brokers Get NSE Shares Ahead of Public Sale - Ghanamma.com\",\"isPartOf\":{\"@id\":\"https:\/\/www.ghanamma.com\/2011\/#website\"},\"datePublished\":\"2011-07-15T04:55:23+00:00\",\"author\":{\"@id\":\"\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.ghanamma.com\/2011\/#website\",\"url\":\"https:\/\/www.ghanamma.com\/2011\/\",\"name\":\"Ghanamma.com\",\"description\":\"News In Ghana - Latest Ghana News Headlines\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.ghanamma.com\/2011\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Collapsed Brokers Get NSE Shares Ahead of Public Sale - Ghanamma.com","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/","twitter_card":"summary_large_image","twitter_title":"Collapsed Brokers Get NSE Shares Ahead of Public Sale - Ghanamma.com","twitter_description":"Business Daily (Nairobi) Moses Michira 13 July 2011 Stockbrokers have reserved large portions of the Nairobi Stock Exchange (NSE) for collapsed rivals in a move that could see them rake in billions of shillings when the bourse is sold to the public early next year. A legal document drafted by the brokers' advisers shows that each of the NSE's 21 intermediaries - whether operational, in receivership or collapsed - has been allocated one million shares worth millions of shillings","twitter_creator":"@ghanamma","twitter_site":"@ghanamma","twitter_misc":{"Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/#article","isPartOf":{"@id":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/"},"author":{"name":"","@id":""},"headline":"Collapsed Brokers Get NSE Shares Ahead of Public Sale","datePublished":"2011-07-15T04:55:23+00:00","mainEntityOfPage":{"@id":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/"},"wordCount":1212,"commentCount":0,"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/","url":"https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/","name":"Collapsed Brokers Get NSE Shares Ahead of Public Sale - Ghanamma.com","isPartOf":{"@id":"https:\/\/www.ghanamma.com\/2011\/#website"},"datePublished":"2011-07-15T04:55:23+00:00","author":{"@id":""},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.ghanamma.com\/2011\/07\/15\/collapsed-brokers-get-nse-shares-ahead-of-public-sale\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.ghanamma.com\/2011\/#website","url":"https:\/\/www.ghanamma.com\/2011\/","name":"Ghanamma.com","description":"News In Ghana - Latest Ghana News Headlines","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.ghanamma.com\/2011\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/posts\/461286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/comments?post=461286"}],"version-history":[{"count":0,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/posts\/461286\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/media?parent=461286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/categories?post=461286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ghanamma.com\/2011\/wp-json\/wp\/v2\/tags?post=461286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}