A State agency responsible for unclaimed assets has revealed a hefty Sh400 billion fee it requires to move abandoned shares under its custody, frustrating its efforts to reunite the multi-billion.
The Unclaimed Financial Assets Authority (UFAA) claimed it requires Sh200 to move each of the two billion idle shares to an account under its custody from the Central Depository and Settlement Corporation (CSDC).
UFAA said the fee had prompted it to drop the push to place the abandoned shares under a single account known as the non-trading Custodial Depository Agent (CDA).
The authority relies on third parties like stockbrokers, share registrars and investment banks to reunify idle shares with owners despite being appointed as a CDA over a decade ago, denying it the right to hold and oversee the abandoned securities.
It is pushing to lower the cost of transferring the stocks from current custodians, including stockbrokers, investment banks and custodians, and commercial banks, to its central account.
Having the shares under CDA would allow the State agency to directly earn dividends from the stocks.
The abandoned shares targeted for transfer to the CDA account are those whose owners have failed to participate in corporate actions for at least three years.
The actions include attending annual shareholder meetings, collecting dividends, or taking up additional shares during stock splits.
Stocks are also deemed abandoned when an issuer of shares, like a publicly traded company, does not know the whereabouts of the owner after a three-year period.
“These shares are being held by various institutions including registrars. We do not have control of those shares,” Laban Molonko, the UFAA chief executive officer, told the National Assembly committee on Finance and National Planning.
“We want to bring these shares from wherever they are held. The UFAA Act allows us to take these shares back and try reunifying the units with their rightful owners.”
UFAA has identified the potential unauthorised transfer of the stocks among the risks posed by the unclaimed shares sitting outside of its custody.
The agency says it is holding discussions with market intermediaries, including the Nairobi Securities Exchange (NSE) and the Kenya Association of Stockbrokers and Investment Banks (Kasib), to bring down the cost of transferring the idle shares to its custody.
The NSE and Kasib are major shareholders in CDSC, holding stakes of 22.5 percent and 18 percent respectively.
UFAA is hoping to appeal to the parties by arguing that the reunification of the unclaimed assets with the rightful owners sits within public interest.
The CDSC currently charges about Sh200 to transfer a single share unit to UFAA, resulting in a hefty Sh400 billion bill to move all 2.03 billion idle shares at present.
“We wanted to undertake the transfers in a phased approach beginning with 400,000 units. For these units, we would pay around Sh200 per share to the CDSC, which would round off to Sh80 million,” added Mr Molonko.
Section 23 of the UFAA Act requires the authority to assume the custody of idle assets, including the rights of the asset holder.
Once shares are deemed unclaimed, their dividends are also considered abandoned.
This means that income accruing from idle shares must also be surrendered to UFAA for reunification to owners.
The law requires the holding company to search for the rightful owners of an asset before declaring it unclaimed and forwarding it to the UFAA.
Most of the unclaimed assets are attributed to failure by the deceased to inform the beneficiaries of the assets besides the absence of a will.
Wealthy Kenyans are also shying away from claiming the billions of shillings in idle assets surrendered to the State.
The UFAA reckons it is struggling to reunite the cash with their rightful owners or beneficiaries, claiming some are being turned off by the worth of assets under the Treasury’s custody.
Inheritance fights have denied beneficiaries a valid will or letters of administration required to gain authority over the assets.
Unclaimed assets include money in bank accounts which have been dormant for more than five years, banker’s cheques not cashed and contents in safe deposit boxes unclaimed for more than two years.
Many Kenyans, said the authority, including billionaire businessmen, former powerful government officials and prominent politicians, remain disinterested in pursuing funds legally belonging to them or their families.
Once the shares are transferred to the non-trading CDA, UFFA will receive dividends, participate in shareholder meetings and get grounds to push for board seats if idle shares from a single firm are substantial to allow for a directorship position.
The CDSC facilitates holdings of shares in electronic accounts, opened by shareholders, and manages the process of transferring shares traded at the NSE.
UFAA reckons that the transfer of idle shares to its custody will help ease the reunification process, avoiding the duplication of roles and processes, where other CDAs like stockbrokers and investment banks are expected to help transfer units to rightful owners.
