The Capital Markets Authority (CMA) has summoned stock market
trader Aly-Khan Satchu for questioning over his role in insider dealings
in oil marketer KenolKobil
shares ahead of last week’s announcement of a takeover plan by French firm Rubis Energie.
Mr
Satchu, a stock broking agent of Kestrel Capital and the chief
executive of data vendor Rich Management, is expected to meet the CMA's
compliance officers tomorrow (Thursday) at 10 a.m. to explain his role
in the suspected trades that saw shares running into millions of
shillings transacted in just three days.
The CMA said
in its letter yesterday that Mr Satchu is suspected of recommending to
Kestrel unsolicited clients who went on to purchase large quantities of
KenolKobil shares ahead of the takeover announcement.
Messers Abdul Hameed Sheikh, Jamal Farzeen Zaherali, Nureen
Moledina, Radia Anand Dineshchandra Kantilal and Tiwari Adrian Simon are
named as the clients Mr Satchu recommended to Kestrel to buy KenolKobil
shares.
“It has been brought to the attention of the
authority that as a stock broking agent of Kestrel Capital Limited, you
caused and/or recommended the following unsolicited clients (some of
whom had never traded in securities or opened CDS accounts before) to
purchase KenolKobil shares barely a week before the announcement,” the
letter says.
“In this regard, and pursuant to the
provisions of Sections 13 (1) and 13 B (2) (a), (b), (c) and (d) of the
Capital Markets Act, the authority would like to interview you on the
issue so as to provide clarifications and record a statement.”
CMA
director of market operations Wycliffe Shamiah yesterday asked Mr
Satchu to confirm his availability for the probe that could lead to
hefty fines if the crime of insider trading is established.
Mr Satchu declined to comment on the matter or indicate whether he would honour the summons.
“If I have been summoned, there is no way I can preempt it here,” he said.
Mr
Satchu is expected to meet the CMA’s manager for investigations and
enforcement, Abubakar Hassan. First time individual offenders in the
crime of insider trading are liable to a fine not exceeding Sh2.5
million or imprisonment for a term of two years and payment of the
amount of the gain made or loss avoided.
First time
offending companies can be fined up to Sh5 million besides full payment
of the amount of the gain made or loss avoided. Individual repeat
offenders are liable to a fine of up to Sh5 million or seven years
imprisonment and payment of twice the amount of gain made or loss
avoided.
Companies committing a repeat offence are
liable to a fine of up to Sh10 million and payment of twice the amount
of the gain made or loss avoided.
The CMA had, hours
after Rubis announced the impending takeover, frozen some accounts on
grounds that it had identified “potentially irregular trading” on the
KenolKobil counter.
KenolKobil moved 403 million shares
valued at Sh6.1 billion in the trading week ended October 26. The
trading dropped significantly a day after the CMA flagged the counter.
Data
from the NSE showed that the share commanded 75.3 per cent of the
entire market’s traded value, edging out Safaricom and banking stocks
that usually command the volumes.
Significant increase
The
Business Daily’s analysis of trades in KenolKobil shares in the week
preceding the takeover bid announcement found a significant increase in
volumes between Monday, October 15 and Monday, October 22.
Daily
market reports by Standard Investment Bank on October 18 and 22 showed
that the trades consisted of local investor(s) buying and foreign
investor sales. On both days, the stock had net foreign sales of Sh838
million.
Investors moved 61.1 million shares worth
Sh909.8 million during the period, averaging a turnover of Sh151.6
million a day at an average price of Sh14.20.
This is
high compared to an average of 101,844 shares a day, with a daily
turnover average of Sh1.6 million in the preceding two weeks when the
company also shed 11 per cent of its value.
The biggest
trades of KenolKobil shares were done on October 18 and 22, when 27.9
million and 29.5 million shares changed hands respectively.
Rubis
on October 23 bought a 24.99 per cent stake or 367,793,124 KenolKobil
shares from Wells Petroleum to achieve the minimum ownership threshold
it needed to launch a takeover bid.
The Capital Markets
(Licensing Requirements) (General) Regulations compel stockbrokers to
maintain client information linking each transaction to the beneficial
owners, including in cases of nominee accounts and trusts.
Insider
trading is deemed to happen when an investor profits by buying shares
ahead of the market based on privileged knowledge of events that would
drive the price up, or dumping shares to avoid losses due to prior
knowledge of negative information.
In the case of
traders that bought shares between October 18 and 22 stand to earn about
Sh500 million once the takeover is complete, taking into account the
Sh8 premium on Rubis’ offer price of Sh23.
In June
2018, the CMA announced that it was investigating two dealers from CBA
Capital and African Investment Bank for possible front-running of
investing in Treasury bonds.
No comments :
Post a Comment