How Morgan Stanley sold Safaricom IPO shares to foreigners on the cheap

A penalty of 1 per cent per month would accrue for every day in the event that the commission was not paid as soon as practicable with two weeks of presentation of the certificate of clearance.

On December 24, 2007, the acting chief executive of the Capital Markets Authority, Stella Kilonzo, wrote to the Treasury and Dyer & Blair complaining that Morgan Stanley had been given very wide discretion regarding final allotment of the international pool.

Ms Kilonzo sought clarification that controls had been put in place to ensure that the allotment was done equitably, considering that Morgan Stanley was also to receive and process applications as the authorised selling agent.

In a letter dated November 29, the Association of Kenya Stock Brokers wrote to the Treasury questioning the wisdom of giving the responsibility for placing two billion Safaricom IPO shares to one book runner.

The Association had suggested that the issue be opened to other players.

In his report, the Controller and Auditor General notes that he saw no evidence showing that attempts were made to address these legitimate concerns.

“In future, the book runner should be sourced competitively and the management of the book should not be left to one company or individual,” says the report.