The CMA has imposed fines and multi-year disqualifications on former Chase Bank Kenya managers after finding they misled bond investors through inaccurate financials and withheld material information tied to the bank’s 2015 medium-term note.
- •Chase Bank issued a KSh 10 billion note programme in 2015 and the first tranche raised KSh 4.8 billion and was listed at the Nairobi Securities Exchange in June 2015.
- •Less than a year later the Central Bank of Kenya placed the lender under receivership and appointed the Kenya Deposit Insurance Corporation.
- •Trading of the bond stopped the next day and the collapse triggered a detailed CMA review of the disclosures made to investors.
The regulator found that the Information Memorandum contained misleading statements and the 2014 financial statements overstated assets and concealed related-party lending through Musharakah structures.
The inquiry also uncovered an irregular bonus payment to then chair Zafrullah Khan and that the bonus was approved in a meeting he chaired without declaring a conflict. The payment was later made in a lump sum against a board resolution.
The CMA fined Khan KSh 5 million and barred him from serving as a director or key capital markets personnel for ten years. He must complete governance training before any future consideration. The regulator found he failed to provide effective board oversight and approved financial statements that misrepresented the bank’s position.
Former General Manager Finance Makarios Agumbi was fined KSh 3.5 million and disqualified for five years a he facilitated the preparation of misleading statements in the Information Memorandum and authorized the lump-sum bonus payment against board instructions.
Former General Manager Corporate Assets James Mwaura was also fined KSh 2.5 million and barred for two years. The CMA found he helped prepare statements that concealed related-party exposures and supported the irregular bonus payment.
Twelve executives and board members were issued with Notices to Show Cause and nine appeared before the Ad Hoc Committee. Khan, Agumbi and Mwaura challenged the hearings at the Capital Markets Tribunal in Appeal 2 of 2022 but the tribunal ruled in February 2024 that the enforcement hearings should proceed.
