The Capital Markets Appeals Tribunal has barred the Capital Markets Authority (CMA) from proceeding with an inquiry into the conduct of eight directors of Imperial Bank during the application of a Ksh 2 billion corporate bond in 2015.
The CMA had initiated an investigation into the directors’ roles in the bond application process, leading to a protracted legal battle. The directors, including Alnashir Popat, Omurembe Iyadi, Jinit Shah, Anwar Hajef, Hanif Somji, Vishnu Dhutia, Eric Bengi, and Mukesh Patel, contested the CMA’s directive, arguing that it violated a 2020 Supreme Court ruling and raised concerns about due process.
The directors cited several grounds for their opposition, including:
- Breach of Supreme Court Ruling: The terms of reference of the Ad-Hoc Committee appointed by the CMA were deemed to be in violation of the Supreme Court’s judgment.
- Improper Composition of the Ad-Hoc Committee: The directors argued that the committee’s composition created a conflict of interest.
- Denial of Rights: They claimed they were denied the right to cross-examine witnesses and faced biased admissibility rules.
- Limitations on Legal Representation: The directors argued that their legal representation was unduly restricted.
- Failure to Address Preliminary Objections: The tribunal found that the CMA failed to adequately address the directors’ preliminary objections.
The dispute stems from the 2015 application by Imperial Bank for a Ksh 2 billion corporate bond issue. Following the approval of the bond and subsequent revelations of fraudulent activities within the bank, the CMA initiated an inquiry into the conduct of the directors.
The directors argued that the CMA, having approved the bond application, had a conflict of interest in subsequently adjudicating the matter. They contended that this violated their rights to fair administrative action and a fair hearing.
While the Tribunal barred the current proceedings, it has allowed the CMA to initiate new enforcement proceedings against the directors.
These ruling highlights the importance of due process and adherence to legal precedent in regulatory investigations. It also underscores the need for clear and unbiased procedures to ensure fairness and protect the rights of all parties involved.