The Capital Markets Authority (CMA) is on the spot after it emerged that at least 500 Kenyans risk losing over Sh1 billion in investments in 15 unregulated products.
The details of the impending scandal are based on more than 500 complaints from investors to the CMA.
This comes as fears rise that investors are staring at the possibility of losing over Sh10 billion placed with Cytonn Investments.
Already, the CMA has acknowledged that the Cytonn product was unregulated and that there is little it can do, leaving everything to the police investigating the matter.
The latest Cytonn scandal comes as MPs investigate the authority over regulatory failures that have led to the loss of at least Sh36 billion of investors’ money under the CMA’s watch.
‘Public responsible’
Appearing before the Finance and National Planning Committee of the National Assembly, CMA Chief Executive Office Wycliffe Shamiah pushed Kenyans under the train tracks, saying his agency is not responsible for investment decisions, especially on unregulated products.
Mr Shamiah went on to say that Kenyans are responsible for the information they consume about unregulated products as the CMA Act only allows him to deal with regulated products.
“An informed investor is a protected investor. We have no responsibility to confirm the information contained in the prospectus,” Mr Shamiah told the committee chaired by Homa Bay County Woman Representative Gladys Wanga.
He also said the CMA has been a target of incorrect information from unregulated entities.
“Kenyans will lose more investing in unregulated products under the cover as per the 500 complaints we have received from the investors,” said Mr Shamiah.
He added that although CMA does not condone unregulated products in the capital markets industry, the CMA Act only allows him to deal with regulated products.
Only option
Mr Shamiah told the committee all he can do is have those marketing unregulated products investigated by the police.
But his comments irked Ms Wanga and her colleagues, MPs Aden Duale (Garissa Township), Chris Omulele (Luanda), David Mboni (Kitui Rural) and Christine Ombaka (Siaya woman rep).
“You are the eyes and ears of investors yet there is nothing you can do. You are trying to catch up with fraudsters in the industry. You can’t claim that you lack the capacity to do your job yet you are funded by the taxpayer,” said Mr Duale.
The regulatory failures at CMA were raised by Mr Duale through a request for a statement from the committee.
The MPs further accused Mr Shamiah of colluding with Cytonn to mislead investors.
Products in question
Mr Duale told the committee that despite the requirements of the Capital Markets Act on disclosure obligations, Cytonn in 2019 presented to investors two products with similar names – Cytonn High Yield Fund and Cytonn High Yield Solutions.
Cytonn High Yield Solutions had “an attractive” 18 percent return per annum and in the process collected over Sh10 billion from investors.
MPs were surprised after Mr Shamiah told them that while the High Yield Fund was regulated by CMA, High Yield Solutions was not, meaning investors’ billions may have gone down the drain.
“This product was not regulated. We did refer this matter to the police for investigations,” Mr Shamiah said. “We tried to transition it into our regulated space but they went to court.”
“I have a court order saying CMA cannot touch Cytonn,” he added, but Mr Mboni accused him of colluding with Cytonn to fleece Kenyans.
“CMA had a discussion with Cytonn to change the name to confuse investors,” Mr Mboni claimed.
Need for probe
Ms Wanga promised to get the nod of National Assembly Speaker Justin Muturi to have the matter transformed into a full-blown inquiry as opposed to a request for a statement as sought by Mr Duale.
“We shall be seeking the indulgence of the House Speaker to have this matter become an inquiry. Our duty is to protect the people and your cardinal responsibility is to protect investors,” Ms Wanga said.
“We shall dig deeper. We will submit a report to the House over what should happen and who should take responsibility.”
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