Tag: Cytonn Investments Limited

  • Court Declines To Strike Out MALI Advocates’ Pleadings In Cytonn Dispute

    Court Declines To Strike Out MALI Advocates’ Pleadings In Cytonn Dispute

    The Court of Appeal has ruled against a request to strike out the notices of appeal and pleadings lodged by MALI Advocates in a dispute involving Cytonn Investment Management and several affiliated parties.

    This decision follows a legal challenge that saw the advocate’s compliance with practice rules scrutinized by the court.

    The case centers on a series of pleadings filed by MALI Advocates in December 2023, amid controversy surrounding the law firm’s registration status.

    The Law Society of Kenya (LSK) had issued a letter barring the firm from offering legal services, though MALI Advocates was not aware of the disbarment when the pleadings were filed, as the firm did not receive the notice until January 2024.

    The official request to strike out the pleadings came from the Official Receiver and SBM Bank, who argued that MALI Advocates, having violated practice rules by failing to comply with certain registration protocols, should not be allowed to continue with the case.

    In its ruling, the Court emphasized that striking out pleadings is a drastic measure, used only in the most compelling circumstances.

    Although the Court acknowledged that MALI Advocates had contravened the Advocates (Practice) Rules by filing pleadings after receiving the LSK’s disbarment notice, it ultimately determined that striking out the pleadings would be an unjust and excessive remedy.

    “In the circumstances, the order that finds favour with us is to preserve the impugned notices of appeal and pleadings while enforcing the LSK’s letter disbarring MALI,” read the ruling in part.

    “Consequently, we decline the invitation to strike out the impugned pleadings.”

    The Court sought to balance the integrity of legal practice with the right of the respondents to access justice.

    As a result of the decision, MALI Advocates LLP remains barred from representing Cytonn Investment Management and other associated parties in the ongoing legal proceedings.

    However, the impugned notices of appeal and pleadings remain valid, pending further developments in the case.

  • Why CMA Faces Investigations

    Why CMA Faces Investigations

    The Capital Markets Authority (CMA) is now staring at parliamentary scrutiny for failing to protect investors, following the proliferation of unregulated and illegal investment funds that have led to loss of investor funds in the country.

    Garissa Township MP Aden Duale has asked the Finance and National Planning Committee to probe the CMA after investors cried foul over unfulfilled promises over the much hyped Cytonn High Yield Solutions (CHYS), offered by Cytonn Investments Limited.

    Cytonn which has for ages marketed the funds as private placements, a closed shop of a few sophisticated investors, limited to 100 investors and didn’t fall under CMA’s radar. However, court filings indicated that Cytonn had raised money from 3,000 investors in breach of regulations that demand funds raised through private placements limits to no more than 100 people.

    The Garissa town legislator also indicated various instances which he claimed was a backslide of the CMA to regulate the capital markets effectively in total disregard of Section 11 of the Capital Markets Act.

    Over time, investor confidence has been eroded on Kenya’s capital markets, with most investors sharing the sentiments that the Capital Markets watchdog has done little in terms of protecting the retail investors. In recent times however, CMA has taken regulatory action against some of the capital markets illegalities, the most recent being over the Kenol Kobil insider trading.

    In addition, the suspension of Deacons, Kenya Airways, ARM Cement, National Bank and briefly Nairobi Business Venture, Marshals East Africa, Atlas, African Lakes Corporation (Africa Online) and Unilever, all have shaken investor confidence, which CMA is ultimately mandated to protect.

    MP Duale’s Citations Over CMA
    • The 2005 Imperial Bank corporate bond valued at Kes 2.0 billion to bondholders which was issued despite having ongoing financial fraud within the bank.
    • Clearing Chase Bank to issue Kes 4.8 billion worth of bonds in 2005, after which the bank fell into receivership.
    • Nakumatt Holdings Supermarkets Kes 4 billion commercial paper issuance in 2018. (In default)

    Aden Duale, now wants the CMA to disclose the total number of unregulated capital market products in the country including the number of invested persons and the role of the regulator in the proliferation of illegal investment funds.

    Further to this, the legislator also wants the effectiveness and efficiency of the CMA established and the total number of firms penalized in last five years including remedial actions issued by the regulator listed