Tuesday, May 05, 2009

CMA & Brokers: Kudos for some transparency

At last, investors know which broker is on their avoid list. Given that DSL was in a similar situation last year, investors should make their own conclusions and move on to either bank-owned brokers and ibs or the high net wealthy serving brokers such as Kestrel. The sea has indeed gone out and all those previously swimming naked can be seen. The issue appears to be liquidity i.e. inability to meet all the demands for payments as they fall due in layman terms. Its as bad as being short on capital and is ofcoursse what brought down Lehmans, Merill Lynch and Bear Stearns, 3 of the 5 largest ibs in the world. How about Unreliable, Suntra and Ngenye Kariuki?
My preference would be for CMA to think like an investor. If Abroker has no cash, they'll use my cash to pay their staff. SO suspend their licences untill they can sort out their liquidity issues. 2ndly, please get brokers to publish quarterly financial statements. Insurers have to do it, all banks have to do it. Kwani whats special about brokers?
For the brokers:
  1. Stop employing everybody and your relas. Get a working online brokerage system. Its initially expensive but cheaper in the long-run.
  2. Pride comes before a fall. You know, we know and everybody who needs to knows a broker licence isn't worth Ksh250mn. It wasn't worth that much even in the bull days.
  3. Find partners: Banks have something you don't have. Distribution networks. They'll fill the gap.


bankelele said...

The public has been warned. Changing a stockbroker is not easy as I found out a few weeks ago; but better a little pain now, than a lot more later

Cynthia said...

"Find partners: Banks have something you don't have. Distribution networks. They'll fill the gap."

Yep - Why do most of the businesses try to channel their esp Investing through banks when they can do so directly with the investment funds....Coz of the then trickle down benefits. Obviously - that isnt common sense :-)

Maishinski said...

Bankelele's experience was invaluable.

Seems like it would be better to sell your holdings at "Broker x" then buy with "Broker Y".

Woe unto you if your counter is illiquid - or if you sell in a bear and by T+2, a bull run kicks in. :-D

Rimis.net said...

Good post