CAUTION

Don't invest in unlicensed products, CMA warns investors

Cytonn CEO Edwin Dande accused the regulator of being petty and malicious.

In Summary
  • In April, investors filed complaints with CMA against investment Cytonn for allegedly failing to pay Sh122.8 million upon maturity of funds
  • Cytonn created the high yield fund in December 2019 with an aim of raising up to Sh30 billion from high net worth investors
Cytonn Investments Management CEO Edwin Dande.
Cytonn Investments Management CEO Edwin Dande.
Image: FILE

The Capital Markets Authority (CMA) has cautioned investors against investing through unlicensed and unapproved entities.

The caution by the regulator comes at the time investors in a local investment firm are complaining that they have not been able to withdraw their funds from a high yield fund, years after putting their money in it..

Cytonn Investments created the high yield fund in December 2019 with an aim of raising up to Sh30 billion from high net worth investors (HNI).

In a statement, CMA chief executive Wyckliffe Shamiah warned that those who invest in products promoted by unlicensed and unapproved entities risk the losing their investments with no recourse under the capital markets regulatory framework.

''Investors who are affected by investing in unregulated products should report to the Capital Markets Fraud Investigation Unit (CMFIU), which is the Police Unit attached to the Capital Markets Authority,'' Shamiah said. 

In April, investors filed complaints with CMA against Cytonn for allegedly failing to pay Sh122.8 million upon maturity of funds in one of its pools.

The 13 investors claimed that Cytonn had delayed payments of between Sh500,000 and Sh25 million, prompting the regulator to petition the courts to bar Cytonn from putting more cash in real estate projects.

The authority said it has licensed Cytonn Asset Management Limited, which is licensed as a Fund Manager for Cytonn Money Market Fund; Cytonn Balanced Fund; Cytonn Equity Fund; Cytonn Africa Financial Services Fund; Cytonn Money Market Fund (USD); and Cytonn High Yield Fund.

It said it has not received any complaints on these regulated products.

''We confirm that Cytonn Investments is not a licensed and approved entity,'' the regulator said.

The law requires that a Unit Trust must have a fund manager to administer funds put in by various investors. This Trust must also appoint a Trustee, which must be a financial institution approved by CMA.

While Cytonn Asset Managers Limited had appointed Co-op Bank as the Trustee, the bank resigned in August last year, in yet-to-be-explained circumstances.

This is not the first time CMA is warning investors against the product by Cytonn. Last year, the wrangle between the firm and the regulator spilled to court, with the latter obtaining a stay order on September 21.

Cytonn CEO  Edwin Dande accused the regulator of malice..

The new turn of events emerged yesterday after an investor Lynn Ngugi accused Cytonn of not honouring its investment contract.