The Capital Markets Authority (CMA) has taken enforcement action against former and current directors of Real People Kenya Limited (RPKL) as well Real People Investment HoldingsLimited (RPIHL) of South Africa for their role in the misappropriation of KSh 1.3 Billion proceeds from the issuance of Medium Term Notes (MTN).
Those affected by the Authority’s action includes RPKL Board Chairman at the time, Arthur Arnold. He has been fined KSh 5 Million and being disqualified from being director of any issuer in Kenya.
This disqualification will only be lifted once the medium-term noteholders recover their money fully together with accrued interest.
Similar action has been taken against Neil Grobbelaar, RPKL Board Member and CEO, who has also been fined KSh 5 Million.
Bruce Schenk, an alternative director to Grobbelaar, has been fined KSh 2.5 Million as disqualified from being director of any issuer licensed by the CMA.
Arumugam Padachie, who was an RPIHL Board Member and Group Chief Finance Officer, has been fined KSh 2.5 Million and disqualified from being a director of any issuer in Kenya licensed by the CMA.
In 2015, CMA approved a KSh 2.5 Billion medium-term note program issued by Real People Kenya Limited. The first tranche issue of KSh 2.5 Billion and raised KSh 1.6 Billion.
After that, RPKL began experiencing financial distress and had been unable to meet its bond obligations, leading to the extension of the redemption dates beyond the August 6th 2018 and August 3rd 2020 maturity dates for the three years and five-year notes, respectively..
CMA initiated investigations and found that RPKL and the South Africa holding firm planned to the cash to pay off an intercompany loan.
A case filed before an ad hoc committee of the CMA concluded that the RPKL Board failed to oversee the MTN proceeds’ application.
While the money was meant for lending to MSMEs in Kenya, the proceeds were used to settle related party loan in South Africa.