The Capital Markets Authority (CMA) erred in sanctioning Cytonn Money Market Fund not to board new clients, the court has found.
In a ruling delivered by Lady Justice Grace Nzioka, the court found that CMA cannot bar money market funds from boarding new clients or unit orders, since there is no such provision in the Capital Markets Act.
“In exercising this power, the Respondent directed the 1st Interested party (Cytonn Money Market Fund) not on board new clients or unit holders. It is argued that, that particular sanction is not provided for under section ii (3) of the Act (Capital Markets Act). That is correct.In my considered opinion, the 2nd Interested party (Cytonn Unit Trust Fund) cannot operate without a Trustee. However, in regulating them the Respondent should cite clearly, the relevant provisions of the law,” ruled Justice Nzioka.
Cytonn Investments CEO Edwin Dande moved to court in December 2019 seeking to have CMA sanctions suspended.
CMA sanctioned Cytonn after it failed to recruit a new trustee following the resignation of Co-operative Bank in the third quarter of 2019.
In the ruling, the court has given Cytonn 30 days to recruit a new trustee and settle matters with CMA, which should now issue a new notice to Cytonn to recruit a trustee.
“In the interest of justice I order that:within thirty (30) days of the date of this order the Applicant shall take all the necessary steps to facilitate the recruitment of the new trustee. In the meantime, the Respondent is at liberty to issue a fresh thirty (30) days’ notice properly anchored in law,” ruled the Judge.
In his arguments, Dande termed the sanctions by CMA as an act of economic sabotage and unreasonable.
He also challenged constitutionality of the regulations 26(1) and 29(1) of the Capital Markets (Collective Investment schemes) regulations 2001, which provides that only banks can be trustees.