Story by James Anyanzwa (Standard
Media)
 |
| Stella Kilonzo (CEO - CMA) picture courtesy of area254.com |
The Capital Markets Authority (CMA)
is looking for a consultant to carry out a comprehensive review of fees,
commissions, and levies paid by investors and issuers, which have partly been
blamed for the industry’s lacklustre performance.
The authority has issued out an
expression of interest, seeking to engage an independent consultant to review
the various fees, levies and commissions charged in the market. This will
include but not limited to regulatory fees, Nairobi Securities Exchange (NSE)
fees, Central Depository and Settlement Corporation (CDSC) fees, and
transaction levies.
Others include investment
management fees, advisory fees, issue costs, brokerage fees and commissions.
The findings and recommendations of the study will inform policy review of the
current fee structure.
The move is part of CMA’s efforts to
deepen the capital markets, whose role in resource mobilisation is critical in
the achievement of the country’s long term development blue-print Vision 2030.
The consultant is expected to
undertake the study with reference to the various fees, commissions and levies
charged in the market. This will assist in determing their adequacy, the impact
of various fees to overall transaction costs and the relevance and basis for
charging/determining the fees and justification for each specific fee.
The consultant would also be
required to consider the relevance of various fees in determining the choice of
investment or fund raising option, consider other ways of generating fees and
revenues for CMA, NSE, CDSC and market intermediaries and consider level of
competitiveness of the current market fees relative to other jurisdictions
comparable to Kenya. He or she would then be required to recommend optimal fees
structure for the Capital Markets.
“The CMA now invites interested
candidates to express their interest to provide the services. Interested
persons must demonstrate ability and capacity to undertake the assignment,”
said CMA.
Each transaction on the securities
exchange attracts a commission of 2.1 per cent for any transactions worth below
Sh100,000 and 1.8 per cent for any transactions above Sh100,000.
Listed companies
CDSC’s main source of revenue is a
transaction levy charged on each transaction settled through the CDSC and a
depository levy charged to listed companies on the basis of the number of
transactions per year but subject to a cap.
The CDSC is paid a transaction levy
of 0.06 per cent and 0.002 per cent of the value of equity and debt
transactions in the secondary market respectively. CDSC also collects levies
from pledges, releases and foreclosures. CDSC proposes that the transaction
levy rate be increased from 0.06 per cent to 0.12 per cent of transaction
value.
Rising operational costs, falling
revenues, stiff competition for limited consultancy contracts and fluctuating
trade volumes at the NSE are swiftly pushing stockbrokers, investment bankers
and fund managers into financial distress.
“ Basically our concerns have to do with the level of
commissions. Over the last one year or so the performance of the NSE has not
been impressive with volumes going down,” said John Kirimi, Executive Director
at Sterling Capital Ltd. “ As we go forward we have to prepare for the worst
because our business is perception-based.”
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