The planned change of ownership at the Nairobi Securities Exchange (NSE) has hit yet another obstacle after the capital markets regulator differed with stockbrokers over the new shareholding structure.
The move by the brokers aims to squeeze two fallen stockbrokers within the government’s stake after they were left out in the initial arrangement, instead of reducing the shares of the 20 seat holders.
Two weeks ago, the Capital Markets Authority (CMA) published new regulations stipulating that the Treasury had already appropriated its 20 per cent stake at the NSE, apparently leaving brokers seething behind the scenes.
The gazetted CMA rules, which had previously been exposed to debate as a draft, indicate that the de-mutualised NSE is 80 per cent owned by 22 brokers and 20 per cent by government.
However, the Kenya Association of Stockbrokers and Investment Banks (Kasib), a lobby for NSE members, countered in a statement issued on Friday that the government did not originally own shares in the NSE and was therefore not in a position to demand a 20 per cent ownership stake in the de-mutualised course.
In the initial agreement, reflected in the newly published rules, the government was to have a 20 per cent stake and the remaining 80 per cent was to be shared out equally amongst 20 brokers, which would give them a four per cent stake each. Two stockbrokers, Francis Thuo and Shah Munge, were however added to the owners’ list and Kasib had said that they too were to get a four per cent stake each, which would leave the government with 12 per cent.
The industry regulator, CMA, has rejected this proposal and has asked brokers to allocate Francis Thuo and Shah Munge shares from the 80 per cent stake they own. The gazette notice says that the Treasury holds a 20 per cent stake in the demutualised NSE and not the 12 per cent that Kasib insists on.
“The number of shares to be allotted to and held directly or indirectly by the Government of Kenya and the CMA Investor Compensation Fund in the public interest being at least twenty per cent of the total shareholding,” said Legal Notice No. 87, published in the Kenya Gazette and dated August 10.
On Friday, Kasib said that no shares had been allocated since the matter had not been concluded.
“No shares have been allotted to the Government or the Investor Compensation Fund as yet because discussions have been going on over these allocations. The government is therefore not ceding part of its 20 per cent because what is stated above has not been effected and as such the NSE as of today is wholly owned by its members,” said Kasib chief executive Willie Njoroge in a statement.
Mr Njoroge told the Business Daily that the gazette notice technically showed that brokers are giving the government shares, and said this went against the original proposal.
“We feel that it does not capture the spirit of what we have been discussing with the CMA and as an association we will be in discussions with them,” Mr Njoroge said.
He said that it planned to talk with the industry regulator and resolve the issue.
A Kasib member, who requested anonymity, said that gazetting the rules while the issue was still ‘not settled’ did not go down well with industry players and the matter looks like it is heading to the court, so as to overturn the legal notice.
“We are meeting and plan to go to court seven days from now if it is not resolved,” said the Kasib member.
On the surface, brokers seem to hold the aces.