Kenya’s capital markets regulator on Wednesday said it had started enforcement proceedings against the former board members of the collapsed Imperial Bank over their failure to perform the oversight role during the issuance of the KSh2 billion corporate bond in 2015.
In a press statement, the Capital Markets Authority (CMA) said that the board members failed “to provide oversight in the preparation, approval and publication of the Information Memorandum for a Ksh2 billion medium-term note issue and [failed] to report the financial statements fraud to CMA and the investing public when it came to their knowledge on 21 September 2015, a day before the bond was allotted to the bondholders”.
Former directors of Imperial Bank tried to stop the enforcement proceedings in 2016 by taking the matter to court, but the Supreme Court, in December 2020, ruled that CMA may proceed with the enforcement actions.
CMA formed an Ad Hoc Committee on 28th January 2021 to conduct legal proceedings against the former members of the board of the Imperial Bank. The committee members are; CMA Board members Dr. Thomas Kibua and John Birech, Retired Chief Justice Dr. Willy Mutunga, Fellows of the Institute of Certified Public Accountant Dr. James McFie and Anne Eriksson, and Patricia Kiwanuka.
On the first day of the enforcement proceedings, only one former board member Mr. Christopher Diaz attended the hearings. Christopher served as an independent and non-executive board member from 1st February 2015 and 13th October 2015.
The Ad Hoc Committee decided not to take any action against Mr. Christopher Diaz considering that he had been newly appointed to the board when the bond issuance process was already underway.
According to a statement by CMA, Imperial Bank applied to issue a KSh2 billion corporate bond on 30 April 2015 and the capital markets regulator approved the issuance on 12 August 2015. The bond offer period opened on 24 August 2015 and closed on 17 September 2015.
Following the sudden death of the Imperial Bank Group Managing Director, Mr. Abdulmalek Janmohamed on 15 September 2015, the bank’s management on 21 September 2015 informed the board chairman and some directors about an alleged financial statement fraud conducted by the late Group Managing Director and some top bank officials since 2006.
The former board chair Alnasir Popat and other directors Omurembe Iyadi, Jinit Shah, Anwar Hajee, Mukesh Patel, Eric Bengi, Vishnu Dhutia, and Hanif Somji failed to act on the crucial information and allowed the bond issuance to proceed.
The Capital Markets Authority suspended the listing of the corporate bond on the Nairobi Securities Exchange in October 2015 and notified the Kenya Deposit Insurance Corporation and the Central Bank of Kenya about the suspicious activities at the bank.