By John Mutiso
The Capital Markets Authority (CMA) has imposed hefty penalties on former top executives of the collapsed Chase Bank Kenya Limited, citing serious breaches in financial reporting, governance, and disclosure during the bank’s issuance of a Medium-Term Note (MTN) programme in 2015.
In a statement on Wednesday, November 19, the regulator said the enforcement action targets the lender’s former chairperson and senior management.
According to CMA, their decisions and omissions contributed to misleading financial disclosures made to investors ahead of the bank’s collapse in 2016.
“In line with its investor protection and oversight mandate, the Capital Markets Authority (CMA) has taken enforcement action against the former Chairperson and Senior Management of Chase Bank Kenya Limited (CBKL-in liquidation).
“This relates to their role in the issuance of the Medium-Term Note (MTN) in 2015 and the use of proceeds,” the statement read.
According to the statement, former Chairperson Zafrullah Khan has been fined Ksh5 million and issued with a ten-year ban.
The CMA Board Ad Hoc Committee found major breaches in oversight and disclosure under his leadership.
“The former CBKL Chairperson, Zafrullah Khan, was fined Ksh5 million and disqualified from being director or key personnel of any issuer, licensed or approved person in the capital market for ten (10) years
“The CMA Board Ad Hoc Committee established that Khan, being a CBKL Board Chairperson, failed to exercise effective oversight over the management of CBKL leading to preparation and publication of false and misleading financial statements disclosed in the published Information Memorandum (IM),” the statement added.
CMA further highlighted failures in transparency involving his own compensation.
“Khan failed to cause disclosure of material information of his bonus payment in a supplementary IM, since the IM had already been published, and was conflicted in chairing and participating in the approval of his own bonus without declaring the conflict,” the statement further read.
Also penalised is former General Manager Finance, Makarios Agumbi, who was found to have played a key role in preparing misleading accounts.
The committee noted that Agumbi facilitated the financial misrepresentations highlighted in the information memorandum.
“The former CBKL General Manager Finance, Mr. Makarios Agumbi, was fined Ksh3.5 million and disqualified from being a director or key personnel of any issuer, licensed or approved person in the capital markets for five (5) years.
“The Ad Hoc Committee established that Mr. Agumbi, in his capacity as the General Manager, Finance of CBKL, facilitated the preparation of false and misleading 2014 financial statements as published in the IM. Further, he unprocedurally paid the bonus in lumpsum to Mr. Khan, contrary to the Resolution by the Board of Directors,” the statement continued.
Former General Manager Corporate Assets, James Mwaura, was also sanctioned for his role in misrepresenting key financial information.
The committee found that he contributed to concealing related-party transactions and other misclassifications.
“The former CBKL General Manager Corporate Assets, Mr. James Mwaura, was fined Ksh2.5 million and disqualified from being a director or key personnel of any issuer, licensed or approved person in the capital markets for two (2) years.
“The Ad Hoc Committee established that Mwaura, in his capacity as the General Manager, Corporate Assets of CBKL facilitated the preparation of false and misleading 2014 financial statements as published in the IM, which contained misclassification and misrepresentation with respect to non-disclosure of related party loans and advances (Musharakah Investments),” the statement read.
Additionally, CMA states that Mwaura played a part in the controversial bonus payout.
“Further, in his capacity as the General Manager Corporate Assets of CBKL, he unprocedurally facilitated the payment of the bonus in lumpsum to Mr. Khan contrary to the Resolution by the Board of Directors,” the statement added.
Beyond the fines and disqualifications, the three former executives have been ordered to undergo mandatory governance training before they can be considered for any senior roles in Kenya’s capital markets.
“Khan, Agumbi and Mwaura were also directed to attend corporate governance training to be eligible for consideration for appointment as a board member or key personnel of any issuer, licensed or approved person in the capital markets in Kenya,” the statement concluded.
