The Court of Appeal has upheld the Capital Markets Authority’s (CMA) power to go after rogue market players.
The court in response to a suit filed by the former directors of the collapsed Imperial Bank ruled that the regulator’s twin role as licensing and enforcement agency cannot be used to claim bias.
The directors had sought to block the regulator from punishing them over their role in raising a Sh2 billion bond in the market just before the lender collapsed in 2015.
Alnasir Popat, Omurembe Iyadi, Jinit Shah, Anwar Hajee, Hanif Somji, Vishnu Dhutia, Eric Bangi, Christopher Diaz and Mukesh Patel had argued in the High Court that since CMA had approved the bond, it was biased in trying to punish them. A three-judge bench hearing the appeal, however, ruled that CMA even after granting approval was still empowered to investigate and take action against the directors as they could have deliberately given misleading information to get approvals.
“With respect, we do not think the trial court’s findings on the impartiality of the apprehension of bias was well founded,” said Court of Appeal judges Erastus Githinji, Daniel Musinga and Otieno Odek.
The judges consequently quashed the High Court’s orders, ruling that the claim of bias had no basis and was erroneous.
“For avoidance of doubt, the appellant shall be at liberty to continue with the administrative proceedings that it had commenced against the respondents,” said the judges.
The directors of the failed Imperial Bank are facing financial penalties as well as being blacklisted from holding a similar position in any listed company if they are found guilty by CMA. They may also be slapped with fines of up to two times the amount of the benefits accruing to them as a result of the breach.
Lying to CMA may also attract additional financial penalties in such amounts as may be prescribed by the regulator.
The precedent-setting ruling is a major win for CMA which is currently fighting several rogue market players who have turned to the courts to block the regulator from enforcing punishment.
For instance, after several suits, CMA had changed tack by appointing independent parties in the punishment panel pursuing former Krestel boss Andre De Simeone, Rich Management Chief Executive Ali Khan Satchu and Managing Director of Bid Securities Kunal Bid who are all implicated in the KenolKobil insider trading scandal.
The authority constituted an ad hoc board committee comprising four CMA board members and four independent persons to hear and determine the allegations contained in the outstanding notices to show cause on the suspicious trades in KenolKobil shares before the announcement of its buyout by French company Rubis Energie.
The four independent members are Retired Chief Justice Willy Mutunga; Dr Jim McFie, a respected academic and business leader; Patricia Kiwanuka, President of the CFA Society of East Africa; and Anne Eriksson, former Country and Senior Regional Partner PWC.
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