Imperial Bank chiefs risk Sh4bn fine over details of bond issue

Regulator mulling over barring them from holding such a position in any listed firm.

Imperial Bank depositors demonstrate outside the financial institution's headquarters along Westlands Road in Nairobi on May 31, 2016. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

In Summary

• Financier’s directors staring at stern disciplinary action if found guilty.

Directors of the fallen Imperial Bank are facing Sh4 billion in penalties and being backlisted from holding the position in any listed company if the Capital Markets Authority (CMA) finds them guilty of misstating details in their Sh2 billion bond issue just before the bank sank in 2015.
According to the CMA Act, if found guilty, the chiefs face disqualification from appointment as director, or licensed or approved person of a listed company.
They may also be slapped with fines of up to two times the amount of the benefit accruing to the directors by reason of the breach.
Lying to the CMA may also attract any additional financial penalties in such amounts as may be prescribed by the regulator.
The CMA board says it has instituted hearings to determine the former directors’ roles in and liability for; material misstatements contained in the information memorandum issued to the investing public.
The authority says it is giving the directors a chance to be heard according to its law governing withdrawal of licences and imposition of sanctions and penalties.
“CMA has today commenced enforcement proceedings for the individual former directors of Imperial Bank Ltd (IBL) under Section 26(8) of the Capital Markets Act, which requires the authority to give persons to be affected by its enforcement actions an opportunity to be heard before any action is taken,” the authority said in a statement to newsrooms.
The market regulator says the probe will be conducted by its full board in light of the gravity of the allegations to be determined.
The closure of Imperial Bank left the markets authority and the Nairobi Securities Exchange with egg on their faces, having approved the Sh2 billion fundraising that almost traded on the day the bank was shut down.
Bond issuers ordinarily go through a rigorous approval process before being allowed to take cash.
The Central Bank of Kenya (CBK) had to release a statement jointly with CMA, clarifying the problems at Imperial Bank had been brought to its attention by the bank’s board of directors forcing the regulators to stop the listing of the Sh2 billion bond that was meant to start trading. Imperial Bank’s board of directors collectively owned a third of the bank.
The CMA is now instituting penalties eight months after the collapse of the bank after what it says was ample time to collect evidence.
“The CMA has noted the proceedings were delayed to allow for the collection of necessary evidence and the actions will be without prejudice to potential liability of the former directors with respect to findings of complicity or knowing perpetration of the fraud scheme that resulted in the placement of IBL under receivership by the Central Bank of Kenya on October 13, 2015,” the notice said