CMA goes after Imperial Bank directors in probe on botched bond offer

The Capital Markets Authority (CMA) has initiated enforcement proceedings against former board members of Imperial Bank over their failure to oversight a compromised bond issue to investors. The commencement of the probe follows a court ruling earlier this year which cleared a CMA-board-appointed Ad Hoc Committee to conduct the proceedings by quashing an objection appeal. Only Christopher Diaz a former independent and non-executive board member attended enforcement hearings. The committee has cleared Mr. Diaz from the probe arguing his appointment to the board which fell when the bond raising process was already underway. Imperial Bank Limited (IBL) applied and received approval to raise Ksh.2 billion through a medium-term note sold to investors with the offer closing on September 17. 2015. Three days later, IBL management informed the lender’s chairman that some directors had sustained financial statement fraud since 2006. The disclosures which came late in the bond issuance stage would trigger events which culminated in the IBL being placed under statutory management by the Central Bank of Kenya (CBK). At the same time, investors in the Ksh.2 billion bond had their funds frozen in the lender with the monies yet to be recovered. The launch of enforcement proceedings is on the back of the imposition of Ksh.15 million fines to board members of Real People Kenya Limited (RPKL) for their role in misappropriating funds amounting to Ksh.1.6 billion raised through a corporate bond issued to Kenya’s investing public. The fraudulent practices in the issuance of corporate bond debt by the two entities has been previously cited for lack-luster activity in Kenya’s corporate debt scene as investors fear losing their cash in the arrangements. The capital markets regulator has nevertheless been pushing to recover the funds while mulling the creation of a cover to cushion investors from losses emanating from future corporate bond issuance.

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