A handful of accounts at the Nairobi Securities exchange have not traded for a period of two years accounting for 88 percent of the total accounts.
As Central Depository and Settlement Corporation (CDSC)reports, the total number of accounts at the NSE is 1.6 million with 1.4 million declared dormant for the last 24 months.
CDSC announced that most of the accounts marked dormant were those of local investors, long-term retail investors, and institutions.
Before declaring a shares account dormant, the CSDC uses a dormancy rule that requires accounts that have not traded for at least 24 months.
The dormancy period stipulated by CDSC ended on 31st December 2018, and a grace period of 60 days added to ensure proper sensitization of investors before the implementation took effect.
When an account is marked dormant, a notification will be sent to the affected investor. The investor will then be required to provide the necessary documents to prove that he or she was trading with the account to get approval.
This will help to curb the issue of fraudsters who have been trading at NSE with other people’s accounts presenting themselves as the original holders.
CDSC revealed that accounts have been marked dormant at the end of every month, and has received more than 2300 requests to reactivate marked accounts.
Local investors have around 80 percent of shares trading at NSE but at the same time, most of their accounts are not functional. Foreigners, on the other hand, have 65 percent of their actively trading at the NSE, posing a threat to the turning and reducing the earnings at the NSE and the intermediaries.
CDSC attributes the increased dormancy of accounts owned by local investors to have been caused by the entrance of companies with big IPOs to the market.
The entrance of companies such as Safaricom and Cooperative Bank in the early 2000s affected investors with low IPOs reducing their frequency of trading at NSE.