Cytonn slams CMA over ‘out-of-fashion’ regulations

Cytonn Investment has slammed the Capital Markets Authority (CMA) over out of fashion regulations which it blames for the continued market stagnation. The finger of blame comes as the pair faceoff in court over the deployment of funds from Cytonn’s regulated high yield fund (CHYF) with the investor firm seeking a favourable ruling to allow it seek the majority of proceeds to in house real estate projects. Cytonn has outlined six thematic arrears in the regulation of collective investment schemes (CIS) which it terms as retrogressive. At the heart of the company’s displeasure is the strangle-hold of banks in the capital markets who not only remain as the primary source of funding but are also the only authorized custodians of pooled funds. Further, Cytonn says minimum investment amounts to both high yield funds and development real estate investment trusts (D-REITs) which sit at Ksh.1 million and Ksh.5 million lock out investments by the average Kenyan. “People still have what I would call a KANU era mentality where you could not have a constructive engagement with your government and regulator. If we raise an issue and has merit, we think we should be listened to,” said Cytonn Investment Officer Edwin Dande. The Wharton Business School graduate argues the capital markets regulator remains resistant to the changing times making it a hurdle to the same market its seeks to upscale. “We need to be capitalizing our capital markets. There is no difference between Kenya and New York, it’s just a matter of mentality,” he added. Additionally, Dande has slammed the CMA over the limitation in number of fund custodians, the lack of specialized CISs’ and what he terms as the arbitrary application of rules and regulations. Cytonn is in court challenging the regulator on the basis of provisions contained in the Fair Administrative Act following the rejection of a request to unlock the deployment a majority of funds raised in the CHYF to in house real estate projects. On its part the CMA want the investments to be capped at no more than 25 per cent following a grant of exemption from the baseline 10 per cent. Meanwhile, Cytonn is seeking to allocate 80 per cent of funds- the full threshold hold allowable by arguing its non-relation to the fund’s custodian and trustees who are the National Bank of Kenya (NBK) and SBM Bank. Intertwined in the litigation however is the safety of investor funds following widespread reports of a potential cash-crunch in the company. Edwin Dande however insists the recent restructure of payments to investors in its Cytonn High Yield Solution (CHYS)- a non-regulated fund has been a routine procedure to mitigate against shocks arising from the pandemic which has seen it phase it projects. “The only thing that would keep me awake is if money was stolen, or a project went South and not a brand bickering with its regulator.”

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