CMA launches probe into former Imperial Bank directors over Ksh2B bond

CMA launches probe into former Imperial Bank directors over Ksh2B bond

The Capital Markets Authority (CMA) has launched enforcement proceedings against former Imperial Bank directors during the bond issue to raise Ksh 2 billion.

The regulator says it has unearthed material misstatements in the Information Memorandum issued to investors putting up money for the bond.

According to the CMA, the former directors failed to disclose material changes to the bank’s operations, implying that bond holders invested on incorrect information.

“The enforcement hearings are expected to determine the former directors’ role in and liability for; material misstatements contained in the Information Memorandum issued to the investing public; omissions and failures of the former board members in failing to disclose material changes in circumstances of IBL in relation to the terms of the bond,” CMA said in a statement.

Imperial Bank was placed under receivership on October 13, 2015, after the discovery of a 13 year fraud scheme that saw Sh34 billion siphoned from the bank. According to the CMA, which approved the information memorandum, former directors failed to alert bondholders and the regulator the troubles bedeviling the bank.

Imperial Bank floated the bond in August 2015 to raise funds for expansion, with investors putting up a minimum of Sh1 m to participate. The capital markets regulator holds directors liable with regards to information that could sway investment decisions.

The move by CMA, throws in a new twist to the ongoing investigations into the fraud at Imperial Bank with the Central Bank set to make a decision on the bank’s fate in June.

By the time of being placed under receivership, the bank had seven listed directors: Alnashri Popat (Chairman), the late group managing director Abdulmalek Janmohamed, Anwar Hajee, Jinit Shah, Mukesh Patel, Vishnu Dhutia and Hanif Somji. The six are expected to individually appear before the CMA.

“In light of the gravity of the allegations to be determined, the hearings are being conducted by the full CMA Board with the objective of being concluded in an expeditious and efficient manner subject to the requirements on procedural fairness and reasonableness,” the CMA said.

The CMA suspended the listing of the bond on the Nairobi Securities Exchange the same day it was placed under receivership. The bond carried a coupon rate of 15 percent, implying that the bondholders claim about Sh300 million in returns per annum.

Both the CMA and CBK are yet to give direction on compensation for bondholders.

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