Three Chase Bank directors take CMA fines war to tribunal


Chase Bank customers mill around the closed bank along Mama Ngina Street in Nairobi on April 7, 2016. PHOTO | EVANS HABIL | NMG

Three former Chase Bank directors have filed an appeal at the Capital Markets Tribunal to block regulatory fines against them for their role in alleged cooking of books and enticing investors to buy the bank’s Sh4.8 billion bond in 2015.

Laurent Demey and Rafiq Shariff who were fined Sh2.5 million each for their role in the issuance and use of the bond and Ken Obimbo, the former finance director who has been handed a Sh5 million fine, have filed to block their penalties at the tribunal.

“Out of the 12 NTSC (notice to show cause) recipients, nine appeared before the Ad Hoc Committee. The other three filed a case at the Capital Markets Tribunal (Tribunal) and further went to High Court to obtain orders stopping the Ad Hoc Committee from conducting enforcement hearing against them,” the Capital Markets Authority (CMA) said.

The three join other directors –former chairman Zafrullah Khan, former general manager for finance Makarios Agumbi and former general manager corporate assets James Mwaura— who refused to appear for disciplinary hearings after blocking the regulator at the tribunal.

Three former executives and five board members were fined a total of Sh36 million.

The move to fight the regulator’s actions at the tribunal offers the directors a reprieve since the tribunal lacks quorum, but they do not get a free pass given the law change that scrapped automatic stay upon appeal.

The Finance Act 2021 deleted subsection 17 of Section 35A of the Capital Markets Act that maintained status quo on matters taken to the tribunal.

Mr Shariff has disputed charges against him, including failure to tell investors the bank planned to pay Mr Khan a Sh1.06 billion bonus.

The bonus was supposed to be drawn in five tranches of Sh200 million but Mr Khan drew the entire amount and lent Mr Shariff Sh174 million through Balst Holding Limited to purchase shares in Chase Bank.

The former director said the decision to pay Mr Khan upfront was to help the bank shore up capital and that the company associated with him got the loan from the former chairman to avoid dilution in the capital raising.

Laurent Demey who was nominated to the board by institutional investors Amethis has fingered Mr Shariff in his appeal where he argues the bonus was contrary to the board approval to stagger it over five years and was paid out without their knowledge.

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