Mr Fred Mweni claims Capital Markets Authority could have lost up to Sh2.6 billion. Photo/Salaton Njau
What you need to know:
Capital Markets Authority says it has appointed a board committee to investigate all bond dealers that have been adversely mentioned in relation to the multi-billion shilling theft case.
The list of stockbrokers and investment banks named to have allegedly handled the fake bonds include Kestrel Capital, Apex Africa Capital, Kingdom Securities and Afrika Investment Bank.
The capital markets regulator is investigating stockbrokers suspected of involvement in trading of bonds that were allegedly stolen from the Central Bank.
In an affidavit filed at the High Court, the Capital Markets Authority (CMA) says it has appointed a board committee to investigate all bond dealers that have been adversely mentioned in relation to the multi-billion shilling theft case.
The affidavit was filed on Monday in response to an earlier application by Fredrick Mweni, a former MD of financial advisory firm Tsavo Securities. Mr Mweni is seeking the court’s reversal of a regulatory ban from holding directorship position in any CMA licensed entity for allegedly refusing to co-operate in the ongoing investigation.
“The (CMA) has been carrying out investigations on the fraudulent trading in bonds suspected to have been transacted by other market players and will take appropriate action against them if need be,” says the market regulator in the affidavit filed on May 13.
Mr Mweni has claimed that the Treasury could have lost up to Sh2.6 billion in the theft of government securities suspected to have been executed by some Central Bank staff, in collusion with rogue bond dealers.
The list of stockbrokers and investment banks named in the court document to have allegedly handled the fake bonds include Kestrel Capital, Apex Africa Capital, Kingdom Securities and Afrika Investment Bank.
Mr Mweni claims in the court documents that Kestrel handled bonds on behalf of Tsavo Securities, and also allege the other three brokers handled bonds on behalf of Manline Communications, which is accused of involvement in the sale of separate Sh105 million worth of fake bonds.
As part of the investigation, CMA says it has questioned a number of stockbrokers but is yet to release details of the inquiry.
When news of the scam broke last year, it plunged the Nairobi Securities Exchange into a new cloud of uncertainty as a number of financial institutions, including banks, were said to have been caught on the wrong end of the fraudulent deals.
Mr Mweni was entangled in the fake bonds trading scandal for his alleged involvement in dealing three bonds worth Sh18.5 million, Sh9.5 million and Sh11.5 million.
But the trader claims that in suspending him, while leaving all the other brokers and investors involved in the scandal to continue operating, CMA’s actions were discriminatory.
Responding to this claim in the affidavit, CMA head of investigations and enforcement Mr Michael Wanyika says Mweni was suspended for failing to co-operate and provide the information regarding the suspect transaction as demanded by regulator.
CMA also says Mr Mweni has not substantiated his claims that the Treasury lost over Sh2.6 billion in the scam, terming this a pointer that he is withholding information he already knows about the scam.
The CMA also adds that Mr Mweni’s mention of Manline Communications as a party in the fraudulent deals is further evidence that he was aware of or is privy to the scandalous nature of the transactions.
The trader has, however, distanced himself from the transactions, arguing that he legally acquired the bonds from the market and not directly from Central Bank and that his company was duped by one John Thagana who sold him the stolen bonds.
CMA however counters that Mr Mweni had not provided any information to support the claim that he bought the fake bonds from Mr Thagana.
The regulator further refutes Mr Mweni’s claims that he was never given enough time to respond to the queries it raised, saying that the trader was given two months to respond prior to his suspension.
