Bond trader fined Sh208m for fraud
SEE ALSO :Blue chip shares turn into penny stocks“Following conclusion of investigations with respect to allegation of irregular trading of government securities in 2016 and 2017, CMA has imposed a financial penalty of Sh208 million being twice the amount of benefit Mr Muhoro received from irregular trading,” CMA said. A whistle-blower helped CMA unravel the scheme involving collusion between fixed income dealers at investment banks, asset management firms and brokerage firms. The market players colluded with individual bond facility holders in bank custodial accounts to trade bonds ahead of orders placed by non-suspecting investing clients. “Mr Muhoro colluded with fixed income dealers at brokerage firms through creation of artificial arbitrage opportunities, thereby realising a capital gain of Sh104 million by taking advantage of the price differential before the client orders were executed,” said CMA in a statement. CMA used surveillance systems that helped track the gains shared between fixed income dealers and the bond facility owners. The regulator said the gains would later be shared between Mr Muhoro and fixed income dealers at brokerage firms in contravention of provisions of the Capital Markets Act. Muhoro was banned from conducting bonds trading for a period of 10 years.