Dormant share accounts at the Nairobi Securities Exchange (NSE) will be frozen by Friday, authorities have said, as the Central Depository and Settlement Corporation Ltd (CDSC) moves to protect investors against fraud.
CDSC will be targeting accounts that have been inactive for the last two years.
According to the corporation, the accounts will be declared dormant and therefore unable to transact unless reactivated.
CDSC is the provider of clearing and settlement services in the Kenya Capital Markets. It offers secure central custody and simplified, swift and safe transfer of investors’ value.
In order to boost investor confidence in the Market, the corporation has created customized solutions to ensure investors are aware of the transactions that happen in their accounts whenever they occur.
The move will affect individual, corporate, local and foreign accounts which have been dormant.
“Pursuant to the dormancy rules, accounts with no activity for a continuous period of 24 months as at February 28, 2019 will be declared dormant on March 1, 2019.The declaration of dormancy is intended to safeguard investors’ holdings in CDSC accounts,” the corporation announced on Wednesday.
The move means no transactions will be effected on any account declared dormant unless the owners apply for reactivation in line with the CDSC Accounts Dormancy Rules and Procedures which came in place in May 2018.
The custodian of the accounts had granted inactive investors a grace period of nine months from June last year to reactivate them.
Upon declaration of dormancy on an account, the CDSC is required to send a notification to the account holder informing them of the declaration. Disabling inactive accounts will ensure that investors’ money is not vulnerable to fraudsters, according to regulations.
A total of 16,058 CDS accounts were opened last year, a 3.38 per cent increase compared to 15,533 in 2017.
Capital Markets Authority (CMA) show there was 1.23 million investors in equities by December last year, with 95.4 per cent being local individual investors. The bond market had 4,409 investors.
One can apply for reactivation of the account through online portal or mobile application. In the case of activation using Central Depository Agent (CDA), the agent will have to produced receipt and verification of the reactivation instructions and indemnity from the account owner.
CDSC has taken measures to ensure the security of invstors’ shares. It has offsite back up facilities and procedures that ensure business continuity in the event of anything happening either to the computer system or its usual premises.