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.
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.
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 #ticker:KENO 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.
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