The Capital Markets Authority (CMA) has slapped former Chase Bank Directors with a fine of Sh60 million over their alleged role in the issuance of Sh10 billion medium-term bond in 2015.
Former Chase Bank managing director Duncan Kabui and CEO Paul Njaga have received fines of Sh2.5 million each Sh5 million, with the former disqualified from being a director or key personnel of any issuer in the Kenyan capital market for a period of ten 10 years.
Other directors and key managers on the receiving end of the regulatory enforcement action include former Group Finance Director Ken Obimbo who has received Sh5 million and was barred from holding a director role for five years.
The regulator has also fined board members; Anthony Gross, Laurent Demey, and Muthoni Kuria have received fines of Sh2.5 million each while Richard Carter and Rafiq Sharrif have received fines of Sh1 million and Sh2.5 million each.
“Audit firm Deloitte and Touché which was the reporting accountant during the issuance of the bond has received a fine of Sh10 million with the CMA further referencing the conduct of the firm to the Institute of Certified Public Accountants of Kenya (ICPAK) for further action,” stated CMA.
In May, 2015 Chase bank issued a Sh10 billion bond. It gave a coupon rate of 13.1 per cent which at that time was the best rate investors had been offered for 2 years.
The bank’s first tranche was over-subscribed by more than 161 per cent.
“We are happy and humbled that the market saw it fit to invest their money in this bond. …” stated Kibui.
On April 7, 2016, nearly a year after the bond issuance, Chase Bank went under a combination of rumours and panic withdrawal by customers, forcing the Central Bank of Kenya (CBK) to place the lender under receivership.
During its probe of Chase’s bond issuance, the regulator established falsehoods in the preparation of the lender’s financial statements, conflict of interest, and failure to disclose material information.
Following the conclusion of administrative hearings by a CMA, Ad Hoc Committee determined there was a lack of effective oversight by the board members regarding the use of funds raised from the 2015 medium-term notes (MTN) issue.
The bank had intended to apply the funds to finance the expansion of its branch network, strengthen its capital base and invest in IT and product development.