Retail investors at the Nairobi Securities Exchange (NSE) will receive a bigger protection after the market regulator moved to raise the maximum payout from the investor compensation fund four-fold to Sh200,000.
The move, which is at an advanced stage, awaiting clearance by the National Treasury, is expected to cushion individual investors from financial losses arising from the collapse of stock brokerages, dealers and investment banks.
Currently, the compensation fund limits payouts to Sh50,000, implying that retail investors are only insured to a similar extent.
CMA expects the raised limit to encourage additional investments by individual investors at the NSE.
The improved coverage was reached after a market study that involved the CMA, the Kenya Bankers Association and the Kenya National Bureau of Statistics.
The survey assessed the average number of investors at each stock brokerage and the size of funds required to fully cover the individual investors.
“The Sh50,000 maximum compensation limit does not inspire optimism for someone, because effectively… you would not be doing a transaction where you would stand to lose more than Sh50,000,” CMA Director, Regulatory and Policy Luke Ombara told the Business Daily on Thursday.
