A proposed ‘recovery’ board for Nairobi Securities Exchange-listed companies that fall into financial or management trouble is expected to go live in April. PHOTO | FILE | NATION MEDIA GROUP The Kenyan capital markets regulator is locked in a tussle with the Nairobi Securities Exchange over the proposed introduction of a separate trading board for listed companies that fall into financial or management trouble.
While the Capital Markets Authority sees the new “recovery” board as a necessary buffer to protect innocent investors seeking to buy shares of the ailing companies, the NSE views the move as tantamount to condemning and shaming its members.
The CMA and the NSE are not reading from the same script on the plan that the regulator says is designed to give troubled firms time to turn around their fortunes.
The CMA has held its ground, instructing the NSE to submit its rules for the operationalisation of the new board by April this year.
“We only need NSE to submit rules; we don’t require regulations as this is a board, not a new segment,” the CMA director for Regulatory, Policy and Strategy Luke Ombara told The EastAfrican .
The NSE, which has 65 listed firms says singling out its troubled members will add more pain on the beleaguered bourse that is suffering from a prolonged lack of new listings and capital raising by existing firms through rights issues.
“This board affects the market. We received feedback from the market and some issues were raised. There have been some consultations with CMA but no firm outcome yet. We are still in consultations,” said NSE’s chief executive Geoffrey Odundo. “We have not yet come up with a formal position on how we are going to set up this recovery board.”
Although Mr Odundo declined to disclose the contentious issues raised by listed firms, the NSE firms are worried of being pushed into a recovery board, arguing the action will send the wrong signals to investors about their financial soundness, thereby making their stocks less attractive. Listed firms are also uncomfortable with the “recovery board” name tag.
The CMA acknowledges that issues to do with perception, awareness, impact and terminology has delayed the implementation of the plan, but insists that the “recovery board” will go live in April.
The CMA says financially troubled firms including those that fail to comply with disclosure requirements, those that delay in reporting of financial results and those whose working capital falls […]