[2008-10-14]  CMA lays out plan to save stockbroker
The Capital Markets Authority (CMA) has ordered an investigation into the financially troubled Discount Securities Ltd.

News that the stockbroker was having serious cashflow difficulties started circulating within the market last week, but the regulator had refused to answer our queries on the same.

Yesterday’s move has largely been interpreted by players in the market as a face-saving endeavour, in light of the planned Cooperative Bank Initial Public Offering set for this month. With Safaricom shares bleeding and the index heading South, another collapse would have spelt doom for the market.

Sombre faces

Which could explain why the regulator was at pains to emphasise that Discount Securities was not under statutory management.

Flanked by NSE Chief Executive Chris Mwebesa, Chairman James Wangunyu and CMA Chief Executive Stella Kilonzo — all with sombre faces — Mr Chege Waruingi, the CMA Chairman announced that the regulator had appointed an auditing firm, KPMG to probe the broker’s wobbling state of financial affairs and corporate governance issues.

The new Independent Executive Managing Director replaced the firm’s Executive Director David Githaiga immediately.

"It has come to our attention that Discount Securities Ltd have been experiencing corporate governance challenges," Mr Waruingi, told reporters yesterday. The broker is tittering on the brink after issuing bouncing cheques, and flouting the NSE settlement rules of ‘T+5’

The latest news on the firm’s financial misery is bound to generate more jitters, in the struggling capital market and destroy investor confidence that is already at its lowest ebb following the collapse of Francis Thuo & Partners and Nyaga stockbrokers and the prevailing global financial turmoil.

Source: THE STANDARD