•He further wants answers on the role of the CMA in the proliferation of illegal investment funds in the capital markets in Kenya.
Garissa Township MP Aden Duale wants Parliament to take action against the Capital Markets Authority for failing in its regulatory role.
He said missteps by the regulator has led to loss of funds and investments of many innocent investors.
The MP said the estimated total losses incurred by investors due to CMA's negligence s in the tune of the tune of Sh36.8 billion.
Duale, a former Majority leader, said out of CMA’s failure the Imperial Bank Ltd allotted Sh2 billion to bondholders despite having ongoing financial fraud within the Bank in 2005.
He said the bank went under with investor's funds under the watch of the markets regulator.
The lawmaker further wants CMA cited for clearing Chase Bank to issue Sh4.8 billion worth of bonds in 2005, after which the bank fell into receivership.
He holds that the bank subsequently fell into receivership with the investor's funds and later sold to SBM Holdings, as a result of poor regulatory oversight by CMA.
Duale also cited the case of Nakumatt Holdings Supermarkets which in 2018 issued Sh4 billion commercial paper and thereafter defaulted on the same, resulting in write-offs by banks and suppliers.
The MP also cited the case of Cytonn Investments's offerings some of which CMA said were not a licensed.
The firm collected Sh10 billion from investors from the Cytonn High Yield Solutions which it issued in 2019 at 18 per cent returns per annum.
He said that despite the Capital Markets (Securities) (Public Offers, Listing and Disclosures), Regulations restrict private offers to 100 members, Cytonn’s high yield solutions, has an unregulated but ironically approved collective investment vehicle of 4,000 members.
He said Cytonn breached this provision of the law by availing to investors two products with similar names while one was without regulatory approval.
Duale said this was despite the requirements of the Capital Markets Act on disclosure obligations which requires a fund manager or investment adviser to fully disclose to any client or prospective client the nature of the advisory service offered or fees to be charged in such services.
“Despite the requirements of the Capital Markets Act which prohibits investment funds from guaranteeing clients that a specific result will be achieved arising from the advice that will be rendered, Cytonn has continued to promise innocent Kenyans return of 18 per cent in the Cytonn High Yield Solutions under the watchful eye of CMA,” he said.
The MP wants a statement from the Finance committee “following the grave concerns relating to the efficiency by CMA in regulating the capital market industry and the continued loss of investments of innocent Kenyans.”
He seeks to know the total number of all the unregulated capital markets products in the country and the number of investors in the said products.
Duale further seeks answers on the role of the CMA in the proliferation of illegal investment funds in the capital markets in Kenya.
He also wants to know the effectiveness and efficiency of the CMA in regulating the capital markets.
The MP also wants a brief on the total number of firms' penalised by the CMA in the last five years and remedial action taken for investors who lost their funds.
Thousands of investors are staring a loss of more than Sh10 billion after Cytton floated two products with similar names.
The Cytonn High Yield Fund (CHYF)–is regulated by the CMA while the Cytonn High Yield Solutions (CHYS) which works like a chama is not under CMA regulation.
CMA said the matter is under active investigations, even as Duale wants it called out for failing investors.