A Sh105 million government bond scam has seen five senior executives disqualified from employment by or sitting on boards of listed companies. After a 10-months probe since the scandal, involving fraudulent creation and sale of government securities, was discovered, the Capital Markets Authority said the five together with three institutions they represent bears the greatest responsibility.
The individuals have been ordered to pay back millions in capital gains earned from purchase and sale of the discounted fraudulent bonds. The surrendered amount is to be paid into the CMA Investor Compensation Fund. The executives have been barred from office for periods ranging between seven and fifteen year.
"The board of the Authority had taken the stern enforcement action to ensure that the highest standards of governance and transparency are observed in the capital market industry by all players," said CMA chairman Kungu Gatabaki.
Among those banned is former Tsavo Securities managing director Fredrick Mweni who has been disqualified from serving in any position either as employee or a director of any listed company. He will also not hold any license or act as an approved person, including a securities exchange in the capital markets in Kenya for a period of fifteen years. CMA had in December 2012 disqualified Mweni from appointment and service as a director of any listed company due to his failure to provide information to the authority during its conduct of investigations into the fraudulent bond trading.
Also axed yesterday is Bokole Masha, a director of Tsavo Securities who has been banned as a director or an employee of any listed company for a period of ten years. Tsavo Securities has also been required to surrender the capital gains worth Sh3.85 Million, earned from purchase and sale of the discounted fraudulent bonds by Mweni and Masha. "The surrendered amount is to be paid into the CMA Investor Compensation Fund," CMA said.
Tsavo Securities' license has been restricted to the conduct of the investment advisory business with the requirement that it does not conduct any other business. Apex Africa Limited associate director and head of fixed income trading Brian Muchiri has been disqualified as a practitioner for in the capital markets for a period of seven years. Muchiri has been asked to surrender capital gains worth Sh3.74 million earned from the purchase and sale of the fraudulent bonds.
"Apex Africa Limited is also required to surrender commissions earned from the transactions amounting to Kshs. 58,000 to the CMA Investor Compensation Fund," said CMA.
Central Bank's monetary operations and debt management assistant manager Moses Muregi has also been disqualified with immediate effect from appointment for a period of fifteen years.
CMA also blacklisted Duncan Weru and James Wambugu, directors at Manline Telecommunication Services for a period of fifteen years.
Gatabaki said the authority will require market intermediaries and approved institutions to report staff changes as material information available to the public to avoid instances where 'rogue' employees move from one institution to another.
"The authority has also called for further investigation into the circumstances surrounding the fraudulent creation and sale of government securities in respect to specific persons adversely mentioned in the investigation report but whose culpability could not be ascertained," said CMA.