The Capital Markets Authority (CMA) has taken enforcement action against the former Chairperson and Senior Management of Chase Bank Kenya Limited (CBKL-in liquidation) in relation to their role in the issuance of the Medium-Term Note in 2015 and the use of proceeds.
The former CBKL Chairperson, Zafrullah Khan, has been fined Ksh 5 million and disqualified from being director or key personnel of any issuer, licensed or approved person in the capital market for 10 years. The CMA Board Ad Hoc Committee established that Khan, being a CBKL Board Chairperson, failed to exercise effective oversight over the management of CBKL leading to preparation and publication of false and misleading financial statements disclosed in the published Information Memorandum (IM). Khan failed to cause disclosure of material information of his bonus payment in a supplementary IM, since the IM had already been published, and was conflicted in chairing and participating in the approval of his own bonus without declaring the conflict.
The former CBKL General Manager Finance, Makarios Agumbi, has been fined Ksh 3.5 million and disqualified from being a director or key personnel of any issuer, licensed or approved person in the capital markets for 5 years. The Ad Hoc Committee established that Agumbi, in his capacity as the General Manager, Finance of CBKL, facilitated the preparation of false and misleading 2014 financial statements as published in the IM. Further, he unprocedurally paid the bonus in lumpsum to Mr. Khan, contrary to the Resolution by the Board of Directors.
The former CBKL General Manager Corporate Assets, James Mwaura, has been fined Ksh 2.5 million and disqualified from being a director or key personnel of any issuer, licensed or approved person in the capital markets for 2 years. The Ad Hoc Committee established that Mwaura, in his capacity as the General Manager, Corporate Assets of CBKL facilitated the preparation of false and misleading 2014 financial statements as published in the IM, which contained misclassification and misrepresentation with respect to non-disclosure of related party loans and advances (Musharakah Investments). Further, in his capacity as the General Manager Corporate Assets of CBKL, he unprocedurally facilitated the payment of the bonus in lumpsum to Mr. Khan contrary to the Resolution by the Board of Directors.
Khan, Agumbi and Mwaura have also directed to attend corporate governance training to be eligible for consideration for appointment as a board member or key personnel of any issuer, licensed or approved person in the capital markets in Kenya.
CMA approved CBKL’s application to issue a Ksh 10 billion medium-term bond in 2015. The first tranche raised Ksh 4.8 billion and was listed at the Nairobi Securities Exchange on 22 June 2015. On 7 April 2016, Central Bank of Kenya (CBK) appointed the Kenya Deposit Insurance Corporation (KDIC) as a receiver for Chase Bank for twelve months. This led to the suspension of trading of the Chase Bank Bond at NSE on 8 April 2016.
CMA conducted an inquiry to establish if there were any breaches of the capital markets regulatory framework, which may have led to the collapse of CBKL. Following the inquiry, the Authority flagged several issues including; the preparation of false and misleading financial statements; failure to disclose material information; and conflict of interest.
As a result, the Authority issued Notices to Show Cause to CBKL board members and some members of the senior management team and its reporting accountants. An Ad hoc CMA Board Committee was appointed to hear and determine the allegations.
Out of the 12 Notices to Show Cause recipients, nine appeared before the Committee. However, Khan, Agumbi and Mwaura filed a case at the Capital Markets Tribunal (Khan & 2 others v Capital Markets Authority (Appeal 2 of 2022) to stop the Ad hoc Committee from conducting enforcement hearings against them. The Tribunal rendered its ruling on 2 February 2024 and ordered the trio to appear before the Ad hoc Committee to conclude its administrative proceedings. After the conclusion of the administrative hearings on 17 November 2025, the Ad hoc Committee determined that Khan, Agumbi and Mwaura breached the capital markets regulatory framework regarding the use of funds raised during the issuance of the MTN in 2015.