The Capital Markets Authority (CMA) has proposed the establishment of a recovery board at the Nairobi Securities Exchange (NSE).
The board will be mandated to protect investors from losses in case the firms they have invested in are crumbling, or are engaged in illegal activities.
“In order to enhance investor protection, the Exchange (NSE) and the Authority are jointly proposing the establishment of a Recovery Board at the Exchange on which securities of an issuer who is technically insolvent, non-compliant with any other listing obligation or whose operations are being conducted in a manner that is prejudicial to the interest of investors or market integrity can be temporarily listed,” read the statement posted on the government publication, MyGov.
“This will allow companies to develop and implement recovery plans and/or to ensure full compliance with the requisite listing obligations and/or such other conditions as may be imposed by the Authority, while ensuring transparency to the investing public on the status of the entity,” added the statement.
The move will require amendment of the Equities Listing and Trading Rules, which has seen CMA invite public participation for a one month period up to October 10.
This comes at the wake of collapse of several companies listed at the NSE, leading to loss of millions owed to investors.
The latest on the bad books is the National Bank of Kenya (NBK), which was rescued by the Kenya Commercial Bank (KCB) following loss of billions year-in-year-out. At the time of its takeover, the bank had accumulated over Ksh30 billion in bad loans, attributed to poor management.
Troubled cement manufacturer Athi River Mining (ARM) was also delisted after a series of loss making, followed by cash strapped fashion company Deacons.
Atlas Ltd was delisted in May 2017 due to the firm’s unresolved issues at the London Stock Exchange where it was suspended on October 17, 2017 following the resignation of its nominated adviser Stifel Nicolaus Europe Limited.
The move by NSE could have also been triggered by insider trading scandal that hit KenolKobil during the buyout by French firm Rubis Energie.