CMA cautions investors, to probe Cytonn’s fund

By Noel Wandera
Friday, June 18th, 2021 00:00 | 2 mins read
Economic growth. Photo/Courtesy

Capital Markets Authority (CMA) has cautioned investors against investing through unlicensed and unapproved entities and disclosed that it is investigating potential criminal violations for investors in the Cytonn High Yield Solutions (CHYS), an unregulated fund by Cytonn Investments.

The regulator said is is undertaking the investigation through the Capital Markets Fraud Investigation Unit (CMFIU).

“Investors who invest in unregulated products offered or promoted by unlicensed and unapproved entities risk loss of their investments with no recourse afforded to them under the capital markets regulatory framework,’ said CMA chief executive Wyckliffe Shamiah in a statement.

The caution by the regulator comes at the time investors in a local investment firm are complaining that they have not been able to withdraw their funds from a high yield fund, years after putting their money in it.

For instance, a twitter posting which has since gone viral, accuses the investment firm of not honouring their promise to remit the funds as per agreement.

In the video, an investor says despite following the procedure to withdraw her savings in the Cytonn High Yield Fund (CHYF) she has twice been denied access, with the company passing the buck to the Covid-19, despite the funds falling due prior to the outbreak of the pandemic.

This, the aggrieved investor said, was despite Cytonn Investment continuing to market the product, with the company indicating the fund had posted an effective annual rate of 14.78 per cent as at June 15, 2021, with investors stand to earn a return of up to 14 per cent per annum.

“Due to Covid-19, we are not releasing the money. We are taking this as a precautionary measure and so you have to wait another month,” Cytonn answered the investor on the company’s instagram page, which they have since deleted.

In an interesting turn of events, when the investor, having given Cytonn time to organise themselves and make payment, the company said they were “still facing liquidity challenges as the real estate collections are yet to be optimal to support any remittances.”

Factually incorrect

Contacted for comment by the Business Hub, Cytonn Investments chief executive Edwin Dande said “the video making rounds is factually incorrect and misleading, as there is no issue with CHYF where one can invest and withdraw anytime, 24/7 by just dialing *809#.”

Dande said the other real estate funds, including the Cytonn High Yield Solution (CHYS) and Cytonn Project Notes (CPN), which are invested in the real estate were undergoing restructuring as per their respective constitutive documents where the board has extended maturities in tandem with the contracts, which allow extension in such economic times.

It is not the first time Cytonn Investment is having a tiff with its shareholders.

In April this year, the firm sued John Matheka seeking Sh17 million for defamation after serving him a cease and desist notice, after he opposed the firm’s invocation of a force majeure extending the maturity date CHYS and CPN- two unregulated funds- to June this year .

Matheka was against Cytonn’s proposal to investors, that also included conversion of investment into real estate units or entering a standstill agreement where no withdrawals are made for two years and with a one-off renegotiation fee.

To date, they are still fighting to withdraw their money, with Dande stating the two real estate funds are illiquid owing to Covid-19 economic shocks.

He however assured investors they would start getting their money at the end of the extension of maturity, assuring them that “capital in real estate never runs away as the asset is there.”

Noel Wandera

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