Written on Dec 09, 2009 | by Admin
Some 80,000 equities investors under the collapsed Discount Securities can soon resume trading after their shares were formally migrated to the custody of Co-operative Bank of Kenya, in a tripartite agreement on Wednesday.
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This ends a painful wait for the investors, whose fate has been uncertain since the broker became the third intermediary to go under.
It also potentially solidifies the incursion of commercial banks into share trading, and signals the end of the Discount business.
Under the agreement between Capital Markets Authority (CMA), Co-op Bank and Discount Securities, still under statutory management, the bank will provide central depository agency and custodial services to the customers.
CMA placed Discount under statutory management on March 16, 2009. Subsequently, it was excluded from central depository services, which locked out its Central Depository System (CDS) accountholders from share transactions.
The market regulator early this year advertised for transfer of these accounts to an active CDS agent with Co-operative Bank winning the tender.
“The purpose of this arrangement is to enable over 80,000 clients who held shares in CDS accounts through Discount to access trading facilities, which they have not been able to do since the suspension of DSL from trading at the NSE,” said the joint statement issued by the chief executive of CMA, Stella Kilonzo, Co-op Bank MD, Gideon Muriuki, and Discount statutory manager, Johnstone Oltetia.
It added that with the bank’s huge network, clients of the fallen brokers wishing to transfer their shares would not have to travel to Nairobi. (Discount branches closed soon after it collapsed.)
“The Co-op Bank of Kenya has a wide branch network hence clients will be in a position to access their shares at a branch near them,” it said.
A public notice advising customers has been issued. Apart from offering registration and maintenance of CDS accounts, the bank will receive client claim forms for processing by the statutory manager.
Co-op Bank also owns a stockbroker, Kingdom Securities, meaning it is likely to retain a good chunk of the accounts.