Capital Markets

Rogue players thwart CMA enforcement

shamiah

Capital Markets Authority chief executive Wyckliffe Shamiah. FILE PHOTO | NMG

In the year ended June 2021, the Capital Markets Authority (CMA) reported it had fined errant companies Sh1.7 million, a 94 percent decline from Sh32.4 million penalties levied the year before.

The market regulator says the decline is a result of increased compliance among corporates and embracing good corporate governance.

The sharp decline, however, masks scores of companies and individuals who have evaded the regulator’s enforcement actions by challenging its decisions at the courts and the Capital Markets Tribunal.

The courts have nullified some of the regulator’s actions, siding with the individuals who cite infringement of their personal rights or an unfair process of arriving at the enforcement actions.

The regulator last week fined three former Chase Bank executives, and five board members a total of Sh36 million for their role in fudging the bank books and enticing investors into the lender’s suspended Sh4.8 billion bond.

CMA, however, left out three directors who went to the tribunal to stop the penalties.

The regulator summoned 12 Chase Bank directors and management but three –former chairman Zafrullah Khan, former general manager finance Makarios Agumbi and former general manager corporate assets James Mwaura— blocked CMA through the tribunal.

“Out of the 12 [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,” CMA said.

The regulator has struggled to punish errant market players who rush to obtain court protection and spend years ducking the regulator’s big stick through protracted litigation.

For instance, it was only this year that the CMA won the fight to punish a former National Bank of Kenya director after four years of legal battles.

The High Court has upheld a Sh1 million fine and the ban from holding office in listed companies for 10 years that the capital markets regulator slapped on former National Bank of Kenya Chief Finance Officer Chris Kisire for cooking of books and theft.

The regulator has been fighting former NBK directors for four years after it penalised the lenders’ management for cooking books and theft.

Former CBK boss Munir Sheikh and Head of Treasury Solomon Alubala separately appealed CMA fines accusing the regulator of breaching the right to a fair hearing by denying the accused crucial documents.

The regulator is also facing a challenge clearing cases stuck at the tribunal which lacks the quorum to sit and determine matters.

The Judicial Service Commission (JSC) is yet to appoint a secretary and another member of the five-man team meant to serve three-year terms.

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