The Capital Markets Authority (CMA) has fined former Chase Bank Chairman Zafrullah Khan KShs 5 million and barred him from holding any directorial or senior role in the capital markets for 10 years.
The enforcement action follows Khan’s central role in the fraudulent issuance and listing of a KShs 4.8 billion Medium-Term Note (MTN) in 2015, just a year before Chase Bank Limited (CBKL) collapsed and was placed under receivership.
CMA: Oversight Failure and Conflict of Interest
According to CMA, Khan failed to exercise effective oversight as Board Chair, leading to the publication of false and misleading financial statements in the bond’s Information Memorandum (IM).
“Mr. Khan failed to cause disclosure of material information of his bonus payment in a supplementary IM, and was conflicted in chairing and approving his own bonus without declaring the conflict,” the Authority stated.
More Executives Penalised
Two other former CBKL executives have also been sanctioned:
| Name | Former Role | Fine (KShs) | Disqualification |
|---|---|---|---|
| Makarios Agumbi | GM, Finance | 3.5 million | 5 years |
| James Mwaura | GM, Corporate Assets | 2.5 million | 2 years |
CMA found that Agumbi facilitated the production of misleading 2014 financials and unprocedurally paid Khan’s bonus in a lump sum, violating board resolutions.
Mwaura, meanwhile, was cited for his role in the misrepresentation and will also undergo a two-year market ban.
Mandatory Governance Training
All three executives have been directed to attend corporate governance training as a prerequisite for future consideration in senior roles within licensed capital market entities.
Timeline of the Collapse
- June 22, 2015: CMA approved and listed the first tranche of CBKL’s KShs 10 billion bond (KShs 4.8B) on the Nairobi Securities Exchange.
- April 7, 2016: CBKL placed under receivership by the Central Bank of Kenya.
- April 8, 2016: Trading of the bond suspended on the NSE.
How to Protect Corporate Directors from Legal Risks in Litigation
