CMA gets a go ahead to pursue ex-Imperial Bank board members
The Capital Markets Authority (CMA) commenced its enforcement proceedings against former board members of Imperial Bank Limited (IBL) on their their failure to disclose key information while floating the lender’s Sh2 billion bond.
This comes four months after the Supreme Court ruled that CMA has the right to investigate circumstances under which the bank proceeded with the bond, despite insider knowledge it was in trouble.
In a statement by the authority, it said that only Christopher Diaz, a former independent and non-executive board member, who served between 1 February 2015 and 13 October 2015, attended the enforcement hearings before an Ad Hoc Committee of the CMA Board to respond to the allegations.
“Having considered his written and oral submissions the Ad Hoc Committee of the CMA Board did not take any enforcement action against Diaz who had been newly appointed as an independent and non-executive board member when the bond raising process was already underway,” read the statement.
According to CMA, the other former IBL board members declined to appear before the Ad Hoc committee and filed an appeal at the Capital Markets Tribunal.
Further, efforts by CMA to undertake the IBL bond enforcement proceedings had been delayed by the former IBL directors who filed court proceedings in 2016 in the High Court and which culminated in Supreme Court Petition no. 29 of 2019 Alnashir Popat & 8 Others vs Capital Markets Authority.
‘In its judgement delivered on 11 December 2020 the Supreme Court directed that that the CMA may proceed with its enforcement proceedings through its delegated authority under Capital Markets Act,” the authority stated.
“In compliance with the Supreme Court ruling the Authority constituted an Ad Hoc Committee on 28 January 2021 to conduct the enforcement proceedings.”
According to the authority, IBL applied for the issuance of a Ksh2 billion medium-term note on 30 April 2015, which was approved by CMA on 12 August 2015.
The offer period for the bond opened on 24 August 2015 and closed on 17 September 2015.
On the report by CMA, on 21 September 2015, the IBL management informed the chairman and some directors of IBL that there had allegedly been sustained financial statement fraud since 2006 which had been perpetrated by the late Group Managing Director, Abdulmalek Janmohamed together with certain senior members of the bank’s management, until his sudden death on 15 September 2015.
“The disclosure to the IBL chairman and board was made prior to the following crucial dates in the bond issuance process and listing cycle: 22 September 2015 (date of allotment to the bond investors), 28 September 2015 (the settlement date), 6 October, 2015 (before issuance of crediting of notes to CDS accounts and refunds, if any) and 13 October, 2015 (date of Listing and commencement of trading on the Nairobi Securities Exchange),” noted the authority.
CMA suspended the listing of the bond to commence trading. After a preliminary inquiry CMA cancelled the bond issuance and notified Kenya Deposit Insurance Corporation and the Central Bank of Kenya accordingly.
The Ad hoc Committee included: Dr. Thomas Kibua, CMA Board Member; John Birech, CMA Board Member; Retired Chief Justice Dr. Willy Mutunga; FCPA Dr. James McFie; FCPA Anne Eriksson; and Patricia Kiwanuka.
