Dirty Games as retiring Mbaru plays at bourse unmasked

The Nairobi Stock Exchange Chairman, Jimnah Mbaru, who is also the CEO Dyer and Blair Investment Bank, has come under scathing attacks from small brokerage firms for what they term as his influence top have their licenses terminated.

This has not gone down well with the brokers since the chairman, who is about to retire from the elective position next month after years at the helm, has changed his tune and come up with proposals which might affect their business.

Among the contentious proposals the chairman is calling for is the increase of the minimum paid-up capital to at least Sh 400 million for investment banks while stock brokers would have a minimum capital base of Sh 200 million.

This has come hot on heels of the Capital Markets Authority report confirming that the NSE is controlled by a few stock broking barons who have overshadowed the affairs at the Nairobi Stock Exchange for the last 54 years.

Small brokerage firms who are struggling to survive are pointing an accusing finger at Mbaru, who with a strong interest in stock exchange through his now Dyer and Blair Investment Bank has taken advantage of loopholes at NSE to grab a huge share of the market. It is alleged that Mbaru, as the chairman, has been manipulating activities at the NSE with the pretext that it is business as usual.

Investors were shocked by news of the Francis Thuo and Partners collapse and the placement of Nyaga stock brokers in the cold only months after the chairman had expressed confidence that it was time for all Kenyans to change their minds and invest in the NSE. It came as a surprise when theChairman admitted that they were not aware that things were not well with the two firms.

What has confused everyone is the change of hand of ASHBU securities to Afrika Investment Bank. This happened without notice and up to date all customers know that the custodian of their shares in ASHBU simply because they were not notified of any changes. According to sources within the bourse Mbaru influenced CMA, to allow ASHBU securities to be absorbed by Afrika Investment Bank.

A close look by Weekly Citizen established that the Director of Afrika Investment Bank, Peterson Mwangi is, in fact, acting as proxy for Mbaru, who owns the company. Other sources have also intimated that Mbaru is Peterson’s foster father. Peterson has been the manager at Mbaru’s Equator Hospital at Nairobi West for a long period.

It is highly expected that CMA will close its eyes once more to the public after this exclusive report by Weekly Citizen about ASHBU Securities.

Meanwhile, directors of six stock brokerage firms whose annual licenses are due on May 26 are accusing the acting CMA chief executive, MS Stella Kilonzo, of harassing them when they already have the required capital base. This also came when the Safaricom Ipo was in progress and the negative picture chased customers away.

During the period, there was more positive report about NSE chairman’s firm, Dyer & Blair. People are eagerly waiting to see what will transpire after May 26 2008 since most of them have gone ahead and published their capital base, turnover for the year and market share (%) for public scrutiny.

When Weekly Citizen contacted them, NIC Capital director Kevin Bender, Discount securities chairman William Murungu, Bob Mathews stock brokers Bob Mathews, Ngenye Kariuki & Company’s chairman Ngenye Kariuki, Reliable Securities chairman Josphat Konzolo all agreed that there was more than meets the eye in the whole saga.

Market share statistics for last year indicates that the six brokers controlled 15 percent of the total equities turnover, equivalent to Sh 22 billion of the sh 175 billion traded at the NSE last year.

Much of their fear is that the NSE chairman, who is also their competitor, might force CMA to suspend their licenses leading to permanent withdrawal in what CMA terms as continued violation of rules. It is their wish that future NSE chairs will be neutral.

Meanwhile, CMA is now pushing for new laws that will limit the maximum shareholding an individual can own in an investment bank to 25 percent and increase the minimum capital to Sh 250 million from Sh 30 Million. Stock dealers will require a minimum capital of Sh 20 million, up from Sh 20 million.

Broker	Capital Base(mn)	Turnover 2007(bn)	Market Share (%)	Branches	Est
Sterling Securities	47.8	6.86	3.87%	1	1981
CFC	250	17.66	9.97%	7	2000
Faida Investment Bank	80	11.74	6.62%	2	1995
Dyer and Blair	1,000	19.04	10.75%	2	1954
Standard Investment Bank	300	21.07	11.89	2	1995
Drummond Invest Bank	NA	0.92	0.52	1	1949
Bob Mathews	NA	0.80	0.45	1	2006
Discount Securities	30	9.31	5.25	21	1995
Reliable	80	3.38	1.91	1	1994
Apex Investment Bank	100	22.38	12.63	2	1995
Afrika Investment Bank (formerly Ashbu)	100	5.25	2.96	1	1997
Ngenye Kariuki	15	4.79	2.70	7	1980
Kestrel	NA	16.71	9.43	1	1995
African Alliance	120	8.57	4.83	2	2003
NIC Capital Securities (formerly Solid)	130	2.60	1.47	1	-
Nyaga	60	12.21	6.89	-	-
Renaissance	251	0.73	0.41	1	2007
Crossfield	NA	1.35	0.76	1	-

Stock brokers should have a capital base of Sh 5 million. Another Sh 10 million is required for a dealing license.

Investment banks are required to have a minimum capital base of Sh30 million

The NSE requires brokers to include Sh 50 million in their valuations being the goodwill of a seat at the NSE.

NA – Not Available. Broker did not respond.