The capital markets regulator has recovered an additional Sh19 million from rogue traders at the centre of an insider trading investigation involving oil marketer KenolKobil ahead of the firm’s takeover bid by French firm Rubis Energie.
This takes the total amount of money recovered from the investigation to Sh477 million. The sum will be put in the Investors Compensation Fund.
The Capital Markets Authority (CMA) Monday said five unnamed traders whose accounts had earlier been frozen surrendered the money after entering “No Contest Settlement Agreements” with the regulator.
The regulator also said it had cleared from any wrongdoing the chairman of Kestrel Capital, the stockbrokerage firm through which the transactions were channeled.
Kestrel CEO Andre De Simone, who was implicated in the irregular trades, has since left the stockbrokerage company.
“This further recovery is in addition to the Sh458 million recovered in March 2019 related to the larger component of the suspicious trades identified through a total of 14 frozen accounts,” said the CMA in a statement.
CMA said it found a former Kestrel Capital Stock Broking Agent, Kunal Bid, guilty of engaging in market manipulation. Mr Bid now faces jail as well as seizure of personal assets by the State.
“The CMA Board has resolved to initiate enforcement proceedings against (Mr) Bid for possible insider trading in connection with 4 trades leading to potential illegal capital gains of Sh23.5 million,” said CMA.
Another unnamed trader also got reprieve after the CMA cleared him of potential liability for insider dealing.
CMA said it has subsequently released funds amounting to Sh3.8 million belonging to the unnamed trader “following a determination that he had not traded using insider information.”
The regulator has picked four CMA board members and four independent persons to hear and determine the allegations contained in the remaining cases of the suspicious trades in KenolKobil shares.
They include former Chief Justice Willy Mutunga, university don Jim McFie, President of the CFA Society of East Africa Patricia Kiwanuka and former PwC Partner Anne Eriksson.
The market watchdog had in October flagged as suspicious purchases of 56.8 million KenolKobil shares at a cost of Sh850.5 million by five individuals through stocks agent Aly-Khan Satchu in the days leading up to the announcement of Rubis’ offer. This positioned them to book a 53.6 percent gain amounting to over Sh455 million, based on the buyout price of Sh23 per share.
A party is guilty of insider trading if they leak material, price-sensitive and non-public information or use the same to buy or sell securities for personal gain.
First time individual offenders in the crime of insider trading are liable to a fine not exceeding Sh2.5 million or imprisonment for a term of two years and payment of the amount of the gain made or loss avoided.
If a company is a first-time offender it can be fined up to Sh5 million besides full payment of the amount of the gain made or loss avoided.