A rogue treasury bonds dealer who pocketed Sh83.4 million from irregular trades now faces jail as well as seizure of personal assets by the State after the Capital Markets Authority (CMA) found him guilty of engaging in market manipulation between 2016 and 2017.
The CMA Tuesday fined the former CBA Capital executive, David Tumaini Maena, Sh166.9 million, being double the benefit accrued from the irregular trades.
The regulator also referred his case to the Assets Recovery Agency (ARA) with recommendation to confiscate assets he may have acquired from the illegal proceeds. The authority further handed Mr Maena’s file to the Director of Public Prosecution (DPP), Mr Noordin Haji, to consider opening criminal investigations related to the irregular trades.
The regulator yesterday said Mr Maena had been found guilty of dealing in privileged (non-public) information on bond trades, which he used to front-run the market and make dual trades in order to profit at the expense of other investors.
“The Board of the...CMA has taken enforcement action against David Tumaini Maena, following conclusion of investigations with respect to allegations of irregular trading of government securities in 2016 and 2017,” the CMA said in a statement.
The regulator said it had established the presence of a scheme where fixed income dealers at investment banks, asset management firms and brokerage firms colluded with individual bond facility holders in bank custodial accounts to trade bonds ahead of orders placed by non-suspecting investing clients (also known as front-running a client) for gain. It did not name the other parties involved in the scam nor indicate whether they would also be fined.
The CMA said the illegal trades were done through creation of artificial arbitrage opportunities based on privileged knowledge of customer orders.
“The investigation further established that the gains arising from these trades would be shared between fixed income dealers and the bond facility owners in contravention of the capital markets legal and regulatory framework,” CMA said.
According to the regulator, Mr Maena was “a key player in the scheme” who used his position as a dealer in government securities to obtain illegal gains by trading ahead of his clients’ accounts in bond transactions that he facilitated as a broker in 2016 and 2017.
“Mr Maena was given a chance to rebut the investigation findings but failed to do so,” said CMA.
The Business Daily yesterday established that Mr Maena has since quit CBA Capital. He joined Sterling Capital after his stint at CBA but he also later left the firm when the probe came to light. “He quit CBA Capital,” a CBA Capital customer care officer said on phone. “Once the issues came we mutually agreed to go different ways,” said Sterling Capital chief executive officer David Ngaine.
In addition to the fine, the CMA said Mr Maena has been disqualified from holding office “as a key officer of a public listed company and or issuer, licensee or any approved institution of the Capital Markets Authority” for a period of 10 years.