The Unclaimed Financial Assets Authority (UFAA) in Kenya has revealed a substantial Sh400 billion fee required to transfer 2 billion idle shares to its custody. This hefty charge is a major obstacle in the authority's efforts to reunite the multi-billion shilling assets with their rightful owners. The UFAA requires Sh200 to move each share unit from the Central Depository and Settlement Corporation (CSDC) to its account.
The UFAA had initially planned to place the abandoned shares under a single account known as the non-trading Custodial Depository Agent (CDA). However, the authority dropped the plan due to the high transfer costs. Instead, it is relying on third parties like stockbrokers, share registrars, and investment banks to reunify idle shares with owners. The UFAA has been appointed as a CDA over a decade ago but lacks the right to hold and oversee the abandoned securities.
The UFAA is pushing to lower the cost of transferring stocks from current custodians, including commercial banks, to its central account. The authority believes that having the shares under CDA would allow it to directly earn dividends from the stocks. Abandoned shares targeted for transfer are those whose owners have failed to participate in corporate actions for at least three years, such as attending annual shareholder meetings or collecting dividends.
According to Laban Molonko, the UFAA chief executive officer, the authority 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 idle shares to its custody. The NSE and Kasib are major shareholders in CDSC, holding stakes of 22.5 percent and 18 percent respectively.
The UFAA has identified the potential unauthorized transfer of stocks among the risks posed by unclaimed shares sitting outside its custody. The authority reckons that transferring idle shares to its custody will help ease the reunification process, avoiding duplication of roles and processes. This will also enable UFAA to receive dividends, participate in shareholder meetings, and potentially push for board seats if idle shares from a single firm are substantial.
Most unclaimed assets in Kenya are attributed to failure by the deceased to inform beneficiaries of the assets, absence of a will, or inheritance fights that deny beneficiaries a valid will or letters of administration. Wealthy Kenyans, including billionaire businessmen, former government officials, and prominent politicians, remain disinterested in pursuing funds legally belonging to them or their families.
Unclaimed assets in Kenya include money in dormant bank accounts, uncashed banker's cheques, and contents in safe deposit boxes unclaimed for over two years. The UFAA is struggling to reunite the cash with rightful owners or beneficiaries, citing the worth of assets under the Treasury's custody as a major deterrent. Once shares are transferred to the non-trading CDA, UFAA will have greater control over the abandoned securities and can take steps to reunify them with their rightful owners.
Key points
- The Unclaimed Financial Assets Authority faces a Sh400 billion fee to transfer 2 billion idle shares to its custody.
- The high transfer costs have frustrated efforts to reunite the multi-billion shilling assets with their rightful owners.
- The UFAA is pushing to lower the cost of transferring stocks to its central account to ease the reunification process.
