Companies

Imperial owners blame CMA for bond issue

popat

Imperial Bank chairman Alnashir Popat. PHOTO | FILE

Imperial Bank directors say the Capital Markets Authority (CMA) was ‘negligent and reckless’ in approving an information memorandum for a bond sold to investors months before collapse of the lender.

The non-executive directors, in a bid to distance themselves from blame, say they had limited participation in writing the document used to convince investors to sink Sh2 billion into the failed bank, instead heaping responsibility on the managing director, the late Abdulmalek Janmohamed, chief financial adviser James Kaburu, transaction advisers, the auditor PKF Kenya and CMA officials who approved it.

Mr Alnashir Popat (above) says in an affidavit that by sending them the approval letter dated August 15, 2015, the CMA had interrogated the information memorandum and found it to be adequate having gone ahead to approve the bond.

“The petitioners (directors) verily believed that with the involvement of the professionals aforesaid, the information memorandum was adequate in every aspect and it is on this basis that I signed the memorandum on behalf of the board,” said Mr Popat.

The directors say in the court filings that the CMA is expected to exercise effective hands-on and proactive monitoring and regulation of the capital markets.

They add that the CMA Act only protects the regulator and its officers if they act in good faith but not when they are ‘negligent, reckless and or in bad faith’.

“The role and function of the respondent in vetting and approving the bond issue cannot be said to be notional or illusory,” says Mr Popat.

The CMA has accused the directors of misleading the court that the authority was acting as the accuser, prosecutor and judge in a case in which it has an interest.

READ: Imperial directors risk CMA penalties over Sh2bn bond

The regulator in its affidavit says that under the Guidelines of Corporate Governance Practices by Public Listed Companies in Kenya, directors have primary fiduciary responsibility to their shareholders and cannot claim innocence over actions of the management.

The regulator says that according to regulations on public disclosures, the person responsible for the information on the bond is the issuer-- which in the case of a company, is every person who is a director at the time it is issued.

The nine Imperial directors however argue that the guidelines only apply to listed companies and that the failed bank was not listed on the Nairobi bourse.

The directors also dismissed claims that they were trying to frustrate the process by postponing CMA summons since the beginning of the year.

CMA chief executive officer Paul Muthaura had said the bank owners had sought to delay and frustrate the administrative process being undertaken.

“I believe fair administrative action demands mutual accommodation on available dates and not unilateral imposition of dates insensitive to other parties’ prior commitments,” said Mr Popat.