Culpable. Faida is said to have cooked Uchumi Supermarkets’ books during the 2014 rights issue

Faida Bank Founder and Nairobi Securities Exchange Vice Chairman Bob Karina (Center) at a past event (File, Standard)

NAIROBI, KENYA: Corporate governance breaches that saw Faida Investment Bank slapped with a trade ban have hit the firm hard, sending it into losses for the six months to June.

The investment bank posted an after-tax loss of Sh6.9 million as at June this year compared to a profit of Sh6.9 million in a similar period last year.

The firm, associated with Nairobi Securities Exchange Vice Chairman Bob Karina, was banned from carrying any transaction advisory services for at least six months over its role in cooking Uchumi Supermarkets’ books during the 2014 rights issue.

“Faida Investment Bank, the lead transaction advisor during the Uchumi Supermarket rights issue and which has been accused of misleading investors, will not be allowed to carry out any transaction advisory services for at least six months,” said Capital Markets Authority in its ruling in November last year.

According to the investment firm’s financial results, it only made Sh56 million as brokerage commission, down from Sh141 million last year.

Advisory and consultancy fees completely ran dry during the period under review, a far cry from the Sh1.6 million the firm made in the first half of last year.

However, muted activity saw the firm save on direct costs, professional fees and paying directors, halving expenses from Sh128 million previously to Sh62 million.

CMA also imposed a regulatory caution on Faida to ensure its role as a lead transaction adviser in future was conducted in full compliance with the requirements of a regulatory framework.

Inconsistent

In the Uchumi case, the transaction advisors had prepared an information memorandum based on the 2013 financial results that was overtaken by events and in breach of the CMA regulations that required accounts not be more than six months old.

The rights issue opened on November 10, 2014 and closed on the 28th of the same month.

“We found that Uchumi Supermarkets Ltd was inconsistent in its communication to the public, shareholders and staff regarding the purpose of the rights issue,” a report on the Uchumi audit by KPMG read.

The fallout in the rights issue roped in the current NSE chairman and Jamii Bora Chief Executive Sam Kimani who bought retail shares to become the largest shareholder.