The High Court of Kenya has dismissed a petition by Cytonn Asset Managers seeking to quash a directive of Capital Markets Authority (CMA) limiting investment in projects to 10 percent.
Cytonn had moved to court challenging the directive of the regulator arguing that the directive was unreasonable and irregular.
This was after the market regulator wrote to Cytonn Investments to reduce exposure of its high yield fund in two of its real estate properties citing a breach of investment guidelines.
Cytonn had put Ksh123 million ($1.12 million) in the real estate properties which is 64 percent of the money pooled by investors in the Cytonn High Yield Fund, a collective investment scheme (CIS).
This is contrary to the CMA regulations that only allow pooled funds to invest less than 25 percent in one single entity.
Further, the law prohibits CIS funds from investing more than 10 percent in related parties which means Cytonn has breached both limits.
Upon receiving the letter, Cytonn sought the suspension of the directive and the subsequent freezing of the funds held at SBM Bank. Justice Francis Tuiyott, however, dismissed the case.
The letter on June 3, directed Cytonn High Yield Fund through the trustee not to allow Cytonn to invest any further funds held at SBM bank and in any Cytonn-affiliated notes, pending further directive.
The fund was further required to align its investment products with CMA regulations and only invest 10 percent of funds in its portfolio in Cytonn-related projects.