Cytonn Says CMA’s Statement ‘Malicious’ on its High Yield Solutions

Cytonn Investments, a leading alternative investment management firm in the East African Region, has expressed deep concerns over the Capital Markets Authority of Kenya (CMA) statement as ‘malicious’ that it is not a licensed and approved entity to offer Cytonn High Yield Solutions.

This is not the first time the regulator has warned investors against engaging with unlicensed firms offering fund management and investment advisory services trading.

In 2020, the CMA clarified that the only licensed entity is Cytonn Asset Management Limited, which is licensed as a Fund Manager and a Real Estate Investment Trust (REIT) Manager.

According to Cytonn, CHYS was structured as a private offer within the meaning of Regulation 21 of the Capital Markets (Securities) Regulation after consultations with the regulator. 

This means that the Cytonn High Yield Solutions, (CHYS) and Cytonn Project Notes, (CPN) are unregulated real estate funds and are governed by a Board of Investors. The two investments are worth KSh13.5 billion.

“The statement appears malicious and an attempt to distance itself from a real estate fund that has operated for over 8 years, and like other real estate funds globally, has had liquidity challenges given that real estate is a long-term asset and in this case is financed by short-term obligations,” Cytonn said in a statement published on its portal.

This was in response to CMA who had also issued a statement that “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.”

The funds managed by the entity under the approved Collective Investment Schemes are; Cytonn Money Market Fund; Cytonn Balanced Fund; Cytonn Equity Fund; Cytonn Africa Financial Services Fund; Cytonn Money Market Fund (USD); and Cytonn High Yield Fund.

The regulator said it has opened criminal investigations into Cytonn operations and has asked affected Investors to report to the Capital Markets Fraud Investigation Unit. 

“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.

“CMFIU is currently investigating the issue for criminal violations for investors in the Cytonn High Yield Solutions (CHYS). The Authority confirms that Cytonn Investments is not a licensed and approved entity,” he added.

This is after two investors went on social media to complain that the investment firm had declined to be paid their money invested.

https://twitter.com/missturu/status/1405262577643446279?s=20

In 2020, Mr Edwin Dande, CEO Cytonn Investments had said that “CHYS is a fund invested in real estate and whose board of investors approved an extension of maturities by 12 months for Pre-COVID funds. The decision is binding to all CHYS Pre-COVID investors.”