The court has faulted the Capital Markets Authority (CMA) for barring Cytonn from onboarding new clients and unit holders following the resignation of the previous trustee for Cytonn Money Market Fund and the Cytonn Unit Trust Funds.
High Court Judge Grace Nzioka found that the Capital Markets Act did not allow CMA to sanction money markets funds over trustee resignation.
“In exercising this power, the Respondent directed the 1st Interested party (Cytonn Money Market Fund) not on board new clients or unit holders. It is argued that, that particular sanction is not provided for under section ii (3) of the Act (Capital Markets Act). That is correct. In my considered opinion, the 2nd Interested party (Cytonn Unit Trust Fund) cannot operate without a Trustee. However, in regulating them the Respondent should cite clearly, the relevant provisions of the law,” ruled Justice Nzioka.
In court submissions, Cytonn CEO Edwin Dande termed the move by CMA as an act of economic sabotage and unreasonable.
Dande further argued that CMA did not give theCytonn Money Market’s Board a chance to inform its investors.
He also argued that CMA failed to give adequate notice of the nature and reasons of the proposed administrative action which action adversely affected the rights and fundamental freedoms of each and every investment partner of Cytonn Group of companies.
He also challenged constitutionality of the regulations 26(1) and 29(1) of the Capital Markets (Collective Investment schemes) regulations 2001, which provides that only banks can be trustees.
The court has given Cytonn 30 days to appoint a new trustee to replace Co-operative Bank.
“In the interest of justice I order that:within thirty (30) days of the date of this order the Applicant shall take all the necessary steps to facilitate the recruitment of the new trustee. In the meantime, the Respondent is at liberty to issue a fresh thirty (30) days’ notice properly anchored in law,” ruled the Judge.