Banks
Cytonn Investments vs. Capital Markets Authority : A Legal Battle over Unit Trust Fund
The Capital Markets Authority is locked up in a legal battle with Cytonn Investments after the regulator ordered the firm to stop recruiting new investors to join its unit trust scheme.
In a sworn affidavit before the Commercial and Admiralty Division at the High Court in Nairobi, Abubakar Hassan Abubakar, CMA Acting Director of Operations said that the regulatory body acted within its statutory powers to protect investors and also needed to protect the general public from potential risk due to nonperforming trustee.
Disagreements between Capital Markets Authority and Cytonn Investments first arose when Cooperative Bank, who was the trustee of the Ksh 717,336,949.00 Unit Trust Fund resigned in a letter dated 1st August 2019 seeking to relinquish their duties as Trustees by October 31st 2019.
The fund manager, Cytonn, was then given two months to appoint a new trustee for the scheme and when it failed Cooperative Bank did the appointment.
Capital Markets Authority intervened and wrote to Cytonn to find a new trustee by 31st December failure to which it would suspend on boarding new clients or unit holders to the scheme.
Cytonn Investments Chief Executive Officer Mr Edwin H.Dande has filed a constitutional petition against CMA’s decision to freeze the unit trust.
“Fund managers should not be solely restricted to get trustees from just five banks, some of whom are also players in the money market fund industry. The only five banks authorized as trustees are KCB Bank, Cooperative Bank, Stanbic, National Bank and HF Bank,” said Mr. Dance in a statement to the media.
