The Capital Markets Appeals Tribunal has barred the Capital Markets Authority (CMA) from proceeding with an inquiry into the conduct of 8 directors of Imperial Bank during the application of a Ksh 2 billion corporate bond in 2015, shortly before the lender collapsed.
- •CMA had instituted an investigation into the directors’ roles in the bond application process, triggering a long running spat that the tribunal described as ‘a seasoned traveler with no intention of resting.’
- •The eight-Alnashir Popat, Omurembe Iyadi, Jinit Shah, Anwar Hajef, Hanif Somji, Vishnu Dhutia, Eric Bengi and Mukesh Patel-contested that the CMA’s directive was not in compliance with a December 2020 Supreme Court ruling.
- •The directors also cited improper composition of the Ad-hoc Committee, conflict of interest, rights denial to cross examine witnesses, biased admissibility rules, limitation on legal representation and failure to address preliminary objections as grounds to oppose the proceedings.
“The terms of reference of the Ad-Hoc Committee are in breach of Supreme Court Judgement, other relevant case law, and applicable law and as such are declared unlawful and set aside,” the Capital Markets Appeals Tribunal ruled.
The dispute goes back to April 2015 when Imperial Bank applied to CMA for approval for a Kshs. 2 billion corporate bond issue to the public. On 12th August 2015, the CMA approved the Bank’s application to issue the corporate bond.
The next month, the bank’s then-managing director Abdulmalek Janmohamed passed away and Naeem Shah, the Head of Credit, was appointed acting MD. Naeem and the new Deputy Managing Director, James Kaburu, informed the board of of longstanding illegal disbursements authorized by the late Managing Director, concealed from CMA, the Central Bank of Kenya, and the Board of Imperial Bank.
The board suspended the bond issue and appointed FTI Consulting Group of London to conduct a forensic audit. The audit confirmed a fraudulent scheme, leading the CBK to place the shut the lender down. The listing was then suspended as the bank remained under receivership, before undergoing liquidation.
As part of its regulatory duties, CMA initiated an inquiry into the conduct of the Bank’s directors during the bond application period. In May 2016, CMA issued notices to show cause, alleging negligence in the director’s duties to the lender. In turn, the directors argued that CMA’s role in approving the bond and subsequently adjudicating the matter created a conflict of interest, violating their rights to fair administrative action and a fair hearing.
The Tribunal has, however, allowed CMA to start new enforcement proceedings against the directors.
