Auctioneer hammer to fall on defaulters of CMA fines

Players in the capital markets who default on fines and penalties imposed by the regulator now risk having their assets auctioned.

This is after the National Treasury empowered the Capital Markets Authority (CMA) to enforce penalties on rogue players, including charging their assets.

“In this regard, Mr Speaker, I have proposed amendments to the Capital Markets Act to empower the authority to enforce penalties and sanctions on market players who violate laid down rules and procedures,” said Cabinet Secretary Henry Rotich in his budget speech delivered on Thursday last week.

The regulator has in the recent past been active in trying to restore discipline and good corporate governance in the capital markets.

This has seen several market players fined as well as the introduction of a reward scheme for whistle-blowers and the carrying out of a governance audit of listed firms.

Among those who have run afoul of the regulator’s regulations include veteran investment banker James Murigu who was ordered to pay Sh660,000, being the pay he received as director of Uchumi, while Bartholomew Ragalo was ordered to pay back the Sh855,000 he earned as a board member of the ailing retailer.

Although High Court Judge George Odunga later scrapped the penalties on the retailer’s directors on charges of fraud over the flawed Sh895 million rights issue in 2014, CMA has reviewed the ruling and redrafted contraventions against them.

The regulator is also pursuing Former National Bank of Kenya managing director Munir Ahmed whom it slapped with a Sh5 million fine and kicked out of the market for three years while the former head of Treasury Solomon Alubala was fined Sh104.8 million and disqualified for 10 years.

The ailing listed lender’s former chief finance Office Chris Kisire also has a Sh1 million fine hanging over his head while its former chief credit officer George Jaba and Wycliffe Kivunira, who served in the same position on an acting capacity were fined Sh1 million each for misrepresentation of financial statements and “failure to relay correct information on provisioning to the board respectively.”

Recently, Rodrick Muhoro was fined Sh208 million for his role in the bond rigging scheme that involved the use of sensitive information to buy bonds when anticipating an order from the Government.

This enabled him to make a quick buck at the expense of other investors in what is called front-running.

CMA had in February fined former CBA Capital bond trader David Maena Sh166.9 million for supplying Muhoro with insider information on bond trades, which he used to front-run the market, bringing the total fine in the case to Sh374.9 million.

CMA is currently probing another insider trading case involving KenolKobil shares where Kestrel Capital trader Aly Khan Satchu and the firm’s former chief executive Ander Desimone are facing fines of up to Sh2.5 million each and being barred from the market or holding office in a listed company for one to five years for Aly Khan and five to 10 years for Desimone.

The regulator is also pursuing Kunal Somchand Bid who traded through AIB Capital where he is an agent.

Mr Bid is not new to CMA reproaches. He was previously fined Sh30,850 for buying and selling Eaagads Shares to manipulate its value.

The regulator warned Somchand for wash trades - a form of market manipulation in which an investor simultaneously sells and buys the same shares to create artificial activity - conducted on Eaagads’s shares on February 23 and 24, 2017.

In another case, Kumar Sheth Harshad was fined Sh50,000 for the manipulation of Nairobi Business Ventures shares.

Francis Drummond and Company Ltd have also been cautioned over allegations of manipulating TransCentury shares.