Imperial directors risk CMA penalties over Sh2bn bond .

Money Markets

Customers outside an Imperial Bank branch in Mombasa after it was shut down. PHOTO | KEVIN ODIT 

By OTIATO GUGUYU, dotiato@ke.nationmedia.com

In Summary

• Directors of the collapsed Imperial Bank Ltd (IBL) face huge penalties including being denied capital market licences if the regulator finds them guilty of misleading investors in the Sh2 billion bond issue last year.
• According to the CMA Act, if found guilty, the directors face disqualification from appointment as directors of listed companies, the securities exchange and CMA licences.
• The CMA is instituting penalties eight months after the collapse of Imperial Bank after what it says was ample time to collect evidence.

Directors of the collapsed Imperial Bank Ltd (IBL) face huge penalties including being denied capital market licences if the regulator finds them guilty of misleading investors in the Sh2 billion bond issue last year.

The Capital Markets Authority (CMA) says it has instituted disciplinary action against the individual directors for misstating undisclosed facts ahead of selling the ill-fated bond to the public.

According to the CMA Act, if found guilty, the directors face disqualification from appointment as directors of listed companies, the securities exchange and CMA licences.

They may also be slapped with fines of up to two times the amount of the benefit accruing to the directors through the breach.

Lying to the CMA may also attract any additional financial penalties as may be prescribed by the regulator.

“CMA has today [Tuesday] commenced enforcement proceedings for the individual former directors of Imperial Bank Limited 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 regulator said in a statement to newsrooms.

The investigation will be conducted by its full board in light of the gravity of the allegations.

Bond issuers ordinarily go through a rigorous approval process before being allowed to solicit public cash.

The bond almost traded before the bank collapsed. Central Bank of Kenya (CBK) had to release a joint statement with CMA, clarifying the problems at Imperial Bank had been brought to its attention by the lender’s board of directors forcing them to stop the listing. Imperial Bank’s board of directors collectively owned a third of the bank.

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The CMA is instituting penalties eight months after the collapse of Imperial 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 read.

They also face a charge of omission and failure to take or facilitate appropriate interventions to terminate or otherwise suspend the raising of capital from the public based on materially incorrect information.

The authority is fighting to restore public confidence, especially after it stopped trading of another seven-year bond issued by Chase Bank 10 months after it listed.