The people behind one of the most daring insider trading schemes in the country involving the sale of 59 million KenolKobil shares could have walked away with Sh515 million.
The Capital Markets Authority (CMA) has consequently recovered part of the money from the three individuals behind the scheme besides imposing severe penalties on them.
Following the conclusion of investigations, the regulator yesterday said it had found former chief executive and executive director of Kestrel Capital Andre DeSimone and two stockbrokers - Aly Khan Satchu and Kunal Bid - guilty of insider trading. CMA was able to prove that they bought KenolKobil shares at around Sh14.30, anticipating a 60 per cent premium following the announcement of a takeover bid by French firm Rubis at Sh23 per share in October last year on the basis of information that was secretly shared among themselves.
Insider trading is an offence that involves the trading on the stock exchange to one’s own advantage through having access to confidential information.
“Two stockbroking agents used the insider information to deal in the price affected shares by advising and/or buying on behalf of their various clients approximately 59 million Kenol Kobil shares in the week before the takeover announcement was made on 24th October 2018,” said CMA.
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CMA first seized Sh458 million from the beneficiaries of the scheme in March and a further Sh19 million in May after some traders handed back their loot when sought by investigators.
“CMA has completed the outstanding aspects of the insider trading investigations into the KenolKobil counter and has secured the surrender of an additional Sh19 million of potentially illegal gains through No-Contest Settlement Agreements from an additional five traders whose accounts were frozen,” the regulator said. Yesterday, CMA said it had closed the case and dished out punishment to the three key individuals in the scam for their roles besides getting extra money from their accounts.
Former Kestrel boss De Simone has been handed a one-year ban from the capital markets and a Sh2.5 million fine while Mr Satchu has been barred from the market for three years.
“Andre DeSimone disclosed price-sensitive, material, non-public information on the Kenol Kobil transaction on the sale of the 24.99 per cent Wells Petroleum shareholding in KenolKobil to Rubis Energie SAS (Rubis) and the impending takeover of Kenol Kobil Plc by Rubis to the two identified stockbroking agents, Mr Aly Khan Satchu and Mr Kunal Bid,” CMA said.
The regulator has taken Sh4. 6 million from Mr Satchu, being the amount received as commissions from the respective trades conducted on the basis of insider information.
Kunal Bid was, on the other hand, forced to surrender Sh23.7 million gained from trading 2.8 million shares plus Sh333,747 received by Bid Securities Ltd from Kestrel Capita and Sh14,569 received by Bid Management Consultancy Ltd from AIB Capital Ltd.
Ad hoc board
Kestrel Capital voluntarily gave back Sh9.8 million, being the commissions earned on the transactions executed through the two stockbroking agents.
“Kestrel voluntarily entered the settlement neither admitting nor denying liability thereby closing the insider trading investigations in respect to Kestrel as an entity,” CMA said.
The CMA ruling was delivered by an Ad hoc board committee comprising four CMA board members and four independent persons for the sole purpose of hearing and determination of the allegations contained in the outstanding Notices to Show Cause on the suspicious trades in KenolKobil shares.
The four independent members were retired Chief Justice Willy Mutunga; Jim McFie, a respected academic and business leader; Patricia Kiwanuka, President of the CFA Society of East Africa; and Anne Eriksson, former Country and Senior Regional Partner PWC.
