Afrika Investment Bank Limited (AIB) has been ordered to pay Dilesh Somchand Bid Sh8.9 million in compensation, plus an annual interest of 14 per cent beginning August 1, 2009.
Mr Bid sued AIB after it rejected his demand for Sh18 million compensation for loss suffered due to the delayed updating of his investment account that rendered him unable to dispose of the shares when the prices were still high.
A stockbroker, who delayed crediting Safaricom #ticker:SCOM IPO shares into an investor’s CDS account, has been dealt a major blow after the court ordered him to pay the client Sh27 million in compensation.
High Court judge Olga Sewe ruled that Afrika Investment Bank Limited (AIB) must pay Dilesh Somchand Bid Sh8.9 million in compensation, plus an annual interest of 14 per cent beginning August 1, 2009.
Mr Bid sued AIB after it rejected his demand for Sh18 million compensation for loss suffered due to the delayed updating of his investment account that rendered him unable to dispose of the shares when the prices were still high.
“In the result, judgment is hereby entered for the plaintiff against the defendant…for the sum of Sh8,969,133.34 claimed in the further amended plaint. Interest on the aforesaid sum at the rate of 14 per cent per annum compounded from August 1, 2009 till payment in full shall apply,” the court ruled. AIB will also bear the cost of the suit.
Mr Bid said in court documents that in April 2008 he made an application, through AIB, to buy 32.5 million Safaricom initial public offering (IPO) shares at a total cost of Sh162.5 million. He gave details of the CDS account number to which his shares would be credited and a bank account to refund any unutilised funds.
At the close of the IPO exercise he was allotted 6,906,300 shares and his unutilised balance of Sh127.9 million was to be refunded by June 9, 2008.
But the refund delayed, exposing him to paying heavy interest on the loan. In June 2008, he instructed the broker to sell his shares to enable him cash in on the capital gains accrued after share price rose to Sh7.85 from the IPO price of Sh5.
But he was shocked to learn that his shares had not been credited to his account and by August 2008 when he managed to sale them, the price had dropped to Sh5.85, causing him to miss out on the huge capital gains.
Consequently, he earned Sh39.3 million instead of Sh54.2 million he would have earned had he sold his shares in June 2008.
AIB in September 2008 agreed to place Sh7.9 million in a joint account for 90 days, being 50 per cent of the loss and damage he suffered, as it pursued full compensation with CitiBank.
AIB was a lead sponsoring broker during the Safaricom IPO. Mr Bid said AIB later released money in the joint account to him but failed to pay the balance, forcing the investor to move to court.
AIB had defended itself against any responsibility and instead sought to pass the baton to Citibank for failing to credit the shares sale proceeds and refund of excess fund. Citi was the receiving bank for the Safaricom share sale.
The Judge, however, agreed with Citibank’s explanation and absolved it of any liability, directing AIB to bear the burden.
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