Summary
- Afrika Investment Bank Limited (AIB) has been ordered to pay Dilesh Somchand Bid Sh8.9 million in compensation, plus an annual interest of 14 per cent beginning August 1, 2009.
- Mr Bid sued AIB after it rejected his demand for Sh18 million compensation for loss suffered due to the delayed updating of his investment account that rendered him unable to dispose of the shares when the prices were still high.
A stockbroker, who delayed crediting Safaricom IPO shares into an investor’s CDS account, has been dealt a major blow
after the court ordered him to pay the client Sh27 million in
compensation.
High Court judge Olga Sewe ruled that
Afrika Investment Bank Limited (AIB) must pay Dilesh Somchand Bid Sh8.9
million in compensation, plus an annual interest of 14 per cent
beginning August 1, 2009.
Mr Bid sued AIB after it
rejected his demand for Sh18 million compensation for loss suffered due
to the delayed updating of his investment account that rendered him
unable to dispose of the shares when the prices were still high.
“In
the result, judgment is hereby entered for the plaintiff against the
defendant…for the sum of Sh8,969,133.34 claimed in the further amended
plaint. Interest on the aforesaid sum at the rate of 14 per cent per
annum compounded from August 1, 2009 till payment in full shall apply,”
the court ruled. AIB will also bear the cost of the suit.
Mr Bid said in court documents that in April 2008 he made an
application, through AIB, to buy 32.5 million Safaricom initial public
offering (IPO) shares at a total cost of Sh162.5 million. He gave
details of the CDS account number to which his shares would be credited
and a bank account to refund any unutilised funds.
At
the close of the IPO exercise he was allotted 6,906,300 shares and his
unutilised balance of Sh127.9 million was to be refunded by June 9,
2008.
But the refund delayed, exposing him to paying
heavy interest on the loan. In June 2008, he instructed the broker to
sell his shares to enable him cash in on the capital gains accrued after
share price rose to Sh7.85 from the IPO price of Sh5.
But
he was shocked to learn that his shares had not been credited to his
account and by August 2008 when he managed to sale them, the price had
dropped to Sh5.85, causing him to miss out on the huge capital gains.
Consequently, he earned Sh39.3 million instead of Sh54.2 million he would have earned had he sold his shares in June 2008.
AIB
in September 2008 agreed to place Sh7.9 million in a joint account for
90 days, being 50 per cent of the loss and damage he suffered, as it
pursued full compensation with CitiBank.
AIB was a lead
sponsoring broker during the Safaricom IPO. Mr Bid said AIB later
released money in the joint account to him but failed to pay the
balance, forcing the investor to move to court.
AIB had
defended itself against any responsibility and instead sought to pass
the baton to Citibank for failing to credit the shares sale proceeds and
refund of excess fund.
Citi was the receiving bank for the Safaricom share sale.
Citi was the receiving bank for the Safaricom share sale.
The Judge, however, agreed with Citibank’s explanation and absolved it of any liability, directing AIB to bear the burden.
No comments :
Post a Comment