Joseph Bonyo
24 September 2009
Nairobi — On Monday, investors who lost money after the collapse of Nyagah Stockbrokers cash their compensation cheque at any Equity Bank branch after government moved to their rescue.
The cheques have already been posted following release of the funds by the Capital Markets Authority (CMA).
Through the Investor Compensation Funds (ICF), CMA will be spending Sh302 million to paying over 25,000 investors a maximum of Sh50,000.
"We are asking the investors to take their cheques that we have posted to them to any Equity Bank branch across the country and be paid," said Finance Minister Uhuru Kenyatta while announcing the move.
Equity Bank won on competitive binding by offering to cash the cheque at the lowest fees.
According to the CMA, investors who lodged claims of before the end of August this year will be compensated.
"The state cannot compensate you everything but up to a given limit. This is why our maximum compensation is only Sh50,000," CMA chairman, Mr Micah Cheserem, explained.
The remaining 2,744 investor will have to wait until the state sell Nyaga Stockbrokers top management assets to get the extra Sh120 million needed to fully compensate everyone.
This will be the first time that investors are receiving compensation from the fund.
"We are targeting the recovery of assets from the owners and directors of Nyagah to beef up this fund. We will spare no effort in ensuring that this is done," noted Mr Kenyatta.
Nyagah Stockbrokers was put under statutory management in 2008 after failing to meet its financial obligations.
Consequently, the market regulator instituted judicial proceedings against its managing director Patrick Gakiavih seeking judicial assistance to sell his properties to recover the amount.
A forensic audit leaked to the public earlier in the year had however indicated that the firm might have gone down with about Sh1.3 billion of public funds.
The audit by PricewaterhouseCoopers (PwC) questioned the role of the CMA, two key investment banks and a former NSE Chairman in the collapse of the securities firm in 2008.
The collapse of stockbrokers has over the years resulted into a confidence crisis at the Nairobi Stock Exchange.
In the last three years, two other's Francis Thuo and Discount Securities Limited have gone under, taking with them millions of investor funds and trust in the bourse.
The latest development by the regulator gives comfort to another group of investors with Discount Securities limited also under receivership.