[2024] KECMT 131 (KLR)

Obimbo v Capital Markets Authority (Appeal 7 of 2022) [2024] KECMT 131 (KLR) (2 February 2024) (Judgment)

Neutral citation: [2024] KECMT 131 (KLR)

Republic of Kenya

In the Capital Markets Tribunal

Appeal 7 of 2022

Paul Lilan, Chair, Constance Gikonyo & P.Wanga, Members

February 2, 2024

Between

Ken Obimbo

Appellant

and

Capital Markets Authority

Respondent

Judgment

1. Ken Obimbo, the Appellant herein, moved this Tribunal by way of a Memorandum of Appeal dated 16th August 20222 seeking three main reliefs, namely:(a)That this Honourable Tribunal be pleased to set aside the entire Enforcement Decision Report of the Capital Markets Authority Ad Hoc Committee on Mr. Mr. Ken Obimbo.(b)That this Honourable Tribunal be pleased to set aside the Order of the Respondent to pay the costs of this appeal; and(c)That this Honourable Tribunal be pleased to issue any other order favourable to the Appellant as it may find just and expedient to issue.

A. Factual Backround 2. On 6th February 2015, Capital Markets Authority(CMA), the Respondent herein, received an application from Chase Bank Kenya Limited(CBKL), for issuance of a Kshs.10 Billion Medium Term Note (MTN). The application was supported by an Information Memorandum (IM), a prospectus which contained the financial Statements of the CBKL and all other relevant disclosures for public securities.

3. Upon reviewing the application, CMA granted CBKL the permission to issue the MTN and it was subsequently listed in the Nairobi Securities Exchange(NSE) on 22nd June,2015.

4. Thereafter on 7th April 2016, the Central Bank of Kenya appointed the Kenya Deposit Insurance Corporation(KDIC) as the receiver for the CBKL following allegations that the bank was experiencing liquidity difficulties and the stepping aside of its two directors. Consequent to the foregoing, the CMA also concluded that CBKL might not be able to meet its financial obligations and therefore directed the NSE to suspend the trading activity in the MTN on 8th April,2016. The CMA also begun an inquiry into the affairs of the CBKL and concluded the same in 2021.

5. According to the CMA’s inquiry, it was noted that the CBKL financial statements for the period ended 31st December, 2014 were restated in the 2015 financial statements and that the said financial statements for the period ended 31st December, 2014 were published in the IM. In particular the CMA noted that: there was overstatement of cash balance in the financial statements so as to inaccurately enhance the liquidity position of the CBKL; overstatement of income to create a false impression of a highly profitable entity by enhancing its finance base; non-disclosure of the related party loan advances (Musharaka Investments) amounting to Kshs.4. 4 Billion provided by CBKL and which was misclassified in the financial statements contained in the information memorandum; and failure to make material disclosure of the bonus payment of Kshs. 1. 052 Billion paid to Mr. Zafrullah Khan (the former Group Managing Director).

5. In summary, the CMA in its inquiry concluded that there was preparation of a false and misleading 2014 Financial Statements which was part of the information in the IM, failure to disclose material information in the IM relating bonus payment of Kshs.1 Billion to Mr. Zafrullah Khan (the former Group Managing Director). The CMA also concluded that there was conflict of interest on the part of Ken Obimbo, (the Appellant herein) who was the Group Finance Director of the CBKL.

B. Notice to Show Cause and Enforcement Action 6. On the strength of the inquiry’s findings, the CMA issued a Notice to Show Cause (NTSC) dated 5th July 2021 to the Appellant who was said to have been a board member and the Group Finance Director of the CBKL. The Appellant subsequently appeared and was accorded a hearing before an Ad Hoc Committee appointed by the CMA to determine the allegations raised against the Appellant in the NTSC.

7. Eventually, the Ad Hoc Committee found the Appellant culpable and imposed sanctions against him as per the provisions of section 11(3)(cc) of the Capital Markets Act. The CMA imposed a financial penalty of Kshs.5 million on the Appellant. The Appellant was also suspended from being a board member and/or key personnel of any issuer, licensed and/or approved person in the capital market in Kenya for period of five (5) years. The decision and enforcement action of the Authority provoked the appeal herein.

C. The Appeal in Summary 8. Although the Appellant has listed 13 grounds of appeal in his Memorandum of Appeal dated 16th August,2022, in our considered view, the main grounds of appeal revolves round whether the Respondent erred in law and fact in reaching a decision that the Appellant was a member of the Board and the Group Finance Director at the CBKL; and consequently whether culpable in the preparation and publication of false and misleading 2014 financial statements, which were part of the CBKL’s IM issued in 2015.

9. The Appellant has faulted the CMA’s decision as one founded on an error and assumption that he was a board member in the year 2014 or at all. The Appellant has also faulted the CMA for proceeding on an assumption that he prepared and published the financial statements of CBKL for the year 2015 which fact he avers is untrue thus the decision is bad for a material error of fact.

10. The Appellant also faulted the CMA’s decision as an error of law and fact regarding the finding that the Appellant was culpable for non-disclosure of information regarding the aforesaid payment of bonus to Zafrulah Khan and to Rinascimento Global Limited in the IM on the ground that the appellant had no role in the preparation of the IM and approval of the bonus.

11. Accordingly, the Appellant sought orders of this Tribunal to set aside the entire enforcement decision of the CMA’S Ad Hoc Committee on Mr. Ken Obimbo.

D. The CMA’S Response to the Appeal 12. The CMA has opposed the appeal by filing a Statement of Defence and a Statement of Facts dated 10th November 2023. In summary, the CMA’s averments are, among others , that:(a)The published IM listed the appellant as the group Finance Director and this was confirmed by the Financial Statements for 2012. That he ought to have known about the contents of the IM because he joined Rafiki Micro Finance in 2013-2014. (b)The Appellant intentionally failed to inform the Authority that his name appeared in the IM without his knowledge.(c)The appellant did not rebut by production of any documentation before the Ad Hoc Committee to prove that he was not CBKL’s finance director, and as far as the Respondent is concerned, it laid bare its evidence in the IM, a fact which the Appellant confirmed in his testimony before the Ad Hoc Committee;(d)Contrary to the provision of the regulations, the Appellant failed to inform the Authority that his name appeared in the published IM without his knowledge and approval.(e)The Appellant as the head of Rafiki Micro Finance which was a subsidiary of CBKL and owing to their relationship of CBKL being a holding company and Rafiki Micro Finance being a subsidiary, and by virtue of his position in the hierarchy of leadership-as a very key officer who is just below the board-then as Managing Director, he must have interacted with the IM. As such he (the Appellant) stands liable for publishing misleading and false 2014 financial statement, which were part of the IM issued in 2015. (f)The Appellant also acted in conflict of interest for failing to disclose material information relating to bonus payment of Kshs. 1billion to Mr. Zafrullah Khan in a supplementary IM after it was agreed upon. On this issue, the CMA averred that the board approved payment of Kshs.1 billion bonuses on 14th May, 2015 to be paid over a period of 5 years in equal instalments based on the profits of CBKL. However, in flagrant contravention of that, Mr. Zafrullah Khan through affiliated companies accessed the lump sum.(g)In particular, Kshs.475 million of the bonus was paid to Rinaiscimento Global Limited in which the Appellant is a shareholder and that the foregoing points to outright conflict of interest and amounts to breach of his fiduciary duty of loyalty.

E. Submissions Filed by the Parties 13. The parties took directions and filed their respective submissions on this appeal. The Appellant filed his submissions dated 19th October 2023 and Supplementary Submissions dated 16th November,2023 while the Respondent’s submissions on record are dated 10th November,2023. When this matter came up for hearing on the 16th November 2023, their counsels on record agreed to adopt the submissions and the documents on record for the tribunal to consider and deliver a judgment based thereon.

14. We have considered the submissions as well as the Authorities in support as filed by the parties.

15. The Appellant submitted that he was named in the CBKL IM as the Group Finance Director without his knowledge and consent and that he only came to know of it when the CMA sent the NTSC in 2021. Additionally, the Appellant knew that he had been listed as the group director when the CMA had already begun its inquiry into CBKL and at that time the Bank had been suspended from trading in the Stock Exchange Market and the general public was duly aware.

16. The Appellant submitted categorically that he was not a board member, or a Group Finance Director of CBKL in 2015 or at any point during his life of the CBKL. This position, he reiterated, was part of his response to the NTSC to the CMA.

17. On part of the decision dated 2nd August,2022 faulting him for preparing and publishing false information in the 2014 financial statements in his capacity as the Finance Director CBKL, the Appellant submitted that the CBKL 2014 Annual Report and Financial statements were signed by known and listed officers, who did not include the Appellant. The statements show the appellant was not listed as part of the CBKL meetings, nor a board member nor was he the group finance director of the CBKL. There was nothing to show that the Appellant was part of the preparation of the same.

18. The Appellant also submitted that appointment to the corporate structure of a bank would be accompanied by documentary evidence, including approval by the CMA and the Central bank of Kenya. To illustrate this, the Appellant relied on section 9A (1) of the Banking Act which provides that” An institution shall ensure that no person is appointed or elected as a director or appointed as a senior officer unless the Central bank has certified that the person as a fit and proper person to manage or control the institution.”

19. Similarly, Section 24(8) of the Capital Markets Act provides that “Any person licensed by the Authority shall not change its shareholders,directors, chief executives or key personnel except with the prior confirmation in writing of the CMA.”.

20. Besides the foregoing, the Capital Markets Act requires companies to submit names of its key personnel to the CMA annually. There were no records showing the Appellant served in the named capacities and that the CMA did not produce such records to prove their allegations.

21. The Appellant submitted that the Authority erred in fact when it determined that the Appellant was culpable of conflict of interest regarding utilization of the part of the bonus payment to pay for shares allotted to Rinascimento Global Limited when as a matter of fact the Appellant did not participate in the resolution to pay bonus to Zafrullah Khan; he was not a member of the Board of directors of CBKL and was not even an employee of the Bank.

22. In conclusion, the Appellant submitted that he was wrongly implicated and convicted by the CMA and sought orders of this Tribunal to set aside the enforcement Decision Report as it relates to him.

23. On its part, the CMA submitted that the Appellant was listed in the IM and the GFD and that if the Appellant was not aware if this fact he ought to have brought it to question. It was the Respondent’s submission that it discharged its burden of proof as espoused under section 107 of the Evidence Act through the oral testimony of the appellant before the Ad Hoc Committee at page 22 of the transcript attached to the Respondent’s bundle, when he confirmed being the CFO of the Respondent.

24. The Respondent further submitted that whereas the Appellant claims that he did not know that he was listed in the IM yet he had joined Rafiki Microfinance which was a subsidiary of CBKL. That due to their relationship (CBKL being a holding company and Rafiki being a subsidiary) and as the Managing Director, he must have interacted with the IM. The Respondent submitted that by virtue of the Appellant’s hierarchy in the leadership – managing Director and as a key officer who is just below the board-the Appellant must have been aware of the MTN and the contents of the IM including the description of his position and role in the CBKL.

Determination 25. The Tribunal has carefully reviewed both the pleadings and submissions filed by the parties in this matter and noted that the main issue for determination before this Tribunal is whether the Appellant was a member of the Board of the CBKL and the Group Finance Director of the CBKL and consequently whether culpable in the preparation and publication of false and misleading 2014 financial statements, which were part of the CBKL’s IM issued in 2015 and failing to disclose the information relating to the bonus payment of Kshs.1 Billion to Zafrullah Khan in a Supplementary IM.

Issue No.1: Whether the Appellant was a member of the Board of Directors of and the Group Finance Director of the CBKL 26. It is not in dispute that on the Appellant received a Notice to Show Cause dated 5th July,2021 from the CMA pursuant to its statutory mandate seeking from him a detailed explanation relating to the various issues and allegations to enable the Authority arrive at an objective assessment of the Appellant’s potential culpability, if any, for the contraventions cited and where appropriate determine the appropriate enforcement action to be taken. The NTSC read in part that:"As the CBKL group finance director, a member of the board and being a shareholder of one of the companies that received KES.475 million of the approved bonus outgoings od KES. 1. 004 billion as per the table above, you breached paragraph 3. 1.2 (iv) of the Capital Markets Guidelines on Corporate Governance Practices by Public Listed Companies in Kenya 2002 on conflict of interest for public issuers.”

27. The Tribunal has noted from the record that upon being served with the NTSC, the Appellant vide a letter dated 25th November,2021 denied neither ever being a board member of the CBKL nor the Group Finance Director(GFD) during the material time in respect of the MTN issuance. He stated thus:“…1. I was not the CBKL Group Finance director during the material time in respect of the MTN issuance. I was at that time the managing director of Rafiki Microfinance Bank Limited where I had been working since 2013 first as deputy managing director.2. I have never been a board member of Chase Bank Kenya Ltd a review of the directors listed in the accounts for 2014 and 2015 and indeed others before this dates can confirm this.3. I was not involved in the preparation of the financial statements used in the publication of the information memorandum.4. I did not participate in the preparation approval or marketing of the information memorandum.5. I also wish to state the minutes Ref CMA/CMD/59 are not correct in as far as my oversight of the operations IT and Finance Departments at the bank are concerned I ceased oversight of the operations and It departments in 2011 with the appointment of an operations and IT manager I also ceased oversight of the finance department with appointment of the chief finance office. Further this role did not involve an oversight if the day to day transactions within this department as they had a direct reporting line to the bank Managing Director consequently I have not had any role to play in the departments long before preparation of the IM or indeed on the accounts presented therein.6. I did confirm at our meeting that I was not aware that the bonus had been paid and used to pay for shares allotted to Rinascimento Limited until March 2016. 7.A critical review of the documents presented do not support the presumption of my involvement in their preparation and presentation especially if one was to consider that I played no role in the bank since 2012 and at the time of these events I was already engaged at Rafiki as the Managing Director…”

28. When the CBK appointed the KDIC as the receiver for CBKL following allegations of CBKL experiencing liquidity difficulties, the CMA acted pursuant to its statutory mandate under section 11(3) cc(iv) of the Capital Markets Act and directed the NSE to suspend the trading activity in the MTN on 8th April,2016.

29. The CMA stated in the NTSC that it had identified a number of significant issues touching on the Appellant’s compliance with the Capital Markets regulatory obligations as the CBKL group finance director and board member during the material time in respect of the MTN issuance.

30. The Appellant was therefore summoned to show cause in a specific capacity that fell within the regulatory mandate of the CMA i.e as a director, manager or an employee of a licence, approved person or issuer within the meaning of the Act. Indeed, section 13B of the Act provides for the investigatory powers of the CMA in the following words:“13B. (1)Where the Authority has reasonable cause to believe either in its own motion or an as a result of a complaint received from any person that –(a)An offence has been committed under this Act; or(b)A director, manager or employee of licensee, approved person or an issuer or any other person, may have engaged in embezzlement, fraud, misfeasance or any other misconduct in an issuer, licence or approved a person de in connection with its regulated activity; or(c)The manner in which a licensee or approved person has engaged or is engaging in a regulated activity is not in the interest of the person’s client or in the public interests, the Authority may in writing depute a suitably qualified person to conduct investigations into the matter on behalf of the Authority.”

31. Further pursuant to Section 25A of the Act, the Tribunal noted that even where the CMA establishes breach of the provisions of the Act, sanctions that may be imposed and the financial penalties that may be levied against an errant market player are categorised in three broad categories to either cover: (a) the licenced person; (b) issuer of securities exchanges or; (c) an employee of an issuer, or approved person or a director of an issuer or a licenced person.

32. Clearly the CMA must have been alive to the foregoing when it communicated the decision of its Ad Hoc Committee to the Appellant vide a letter dated 2nd August,2022 which emphasised on the Appellant’s capacity at the CBKL as follows:1. Mr. Ken Obimbo, in his capacity as the Group Managing Director of CBKL, prepared and published false and misleading 2014 financial statements, which were part of the CBKL IM for the MTN, issued in 2015. 2.Mr. Ken Obimbo, in his capacity as the Group Managing Director of CBKL, failed to disclose material information relating to the bonus payment Kenya Shillings one billion (Kshs. 1 billion) to Mr. Zafrullah in a supplementary IM after it was agreed upon.3. Mr. Ken Obimbo, in his capacity as the Group Managing Director of CBKL, a member of the Board was collected in receiving part of the bonus payment made for Mr. Zafrullah Khan through related companies.

33. The Appellant having vehemently denied the capacity in which he was summoned, a fundamental legal and factual question for consideration by the Ad Hoc Committee was whether the Appellant was a board member and the Group Finance Director of the CBKL.

34. Although the Respondent did not make any submissions to support the assertion that the Appellant was a board member of the CBKL, it submitted that the Appellant was listed in the IM as the GFD and that by virtue of his position in Rafiki Microfinance he must have interacted with the IM. The Respondent also submitted that under Section 30S (2) and 30E (3) of the Act, the Appellant had a duty to disclose to the public and to the CMA that he had been wrongly listed as a director in the CBKL.

35. The Appellant in response submitted that he only came to know that his name was listed in the IM as GFD when he received the NTSC dated 5th July,2021 and at that point in time, he clarified to the CMA that he was not a board member nor the GFD of the CBKL.

36. The Tribunal has considered the rival arguments made on the issue as to whether the appellant held the position of director and GFD at the Bank and we are persuaded that the moment the Appellant denied his position, the evidentiary burden of proof fell on the CMA to prove its assertion on the Appellant’s capacity. In Kyalo Elly Joy v Samuel Gitahi Kanyeri [2021] eKLR, an authority cited by the Appellant, the Court of Appeal explained the legal burden of proof as follows:“In this appeal, it is clear that the determination of the appeal revolves around the question whether the appellant proved his case on the balance of probabilities and if so what ought to have been the quantum of damages. That the burden of proof was on the appellant to prove his case is in doubt. Section 107 (1) of the Evidence Act, Cap 80 Laws of Kenya provides that:Whoever desires any court to give judgment as to any legal right or liability dependant on the existence of facts which he asserts must prove that those facts exist.This is called the legal burden of proof. There is however evidential burden of proof which is captured in Sections 109 and 112 of the same Act as follows:109. The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of the fact shall lie on any particular person.112. in civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving the fact is upon him.”

37. It is our considered view that proof and determination of that issue was crucial and a jurisdictional issue because section 25A of the Capital Markets Act identifies the persons who fall under the jurisdiction or powers of the CMA. Such persons include licensed or approved persons, listed companies, employees or a director of a licensed or approved person or director of a listed company as provided for in section 11(3)(cc). Section 25A (1) (a), 25A (1) (b) and 25A (1) (c) of the Act lists the three categories of persons it has jurisdiction over and gives specific punishments it can impose. The foregoing provisions refer to specific persons who have a legal relationship with CMA and empowers it to undertake a specific process and punishment. See the case of Aly Khan Satchu v Capital Markets Authority [2019] eKLR

38. The Respondent is a statutory Authority with both administrative and adjudicative capacities under the law. It is empowered to conduct an inquiry and at the same time adjudicate on the dispute. That being the case, it is our view that the Respondent was in perfect position to inquire further on the issues of the Appellant’s directorship and position in the Bank. The Respondent or its Ad Hoc Committee is also not bound by strict rules of procedure. Upon receipt of the response to the NTSC, it could probably have furnished additional documents (if any) to prove this important preliminary issue. We are persuaded to hold that the Respondent failed to take advantage of its dual mandate as elaborated in the decision of the Supreme Court of Kenya in the case of Alnashir Popat & 7 others v Capital Markets Authority [2020] eKLR“[54]… Administrative tribunals are not supposed to operate like courts of law. That is why they are allowed to be masters of their own procedure although they must act fairly. (See Lord Denning’s dictum in Selvara Jan v. Race Relations Board [1976] 1 ALL ER 12). And that is also why we agree with the respondent that for purposes of efficiency and in the carrying out of the objective of the CMA Act, especially in the expeditious disposal of disputes that arise in the operations of the capital markets, the functions set out in Section 11(3)(cc)(h) cannot be performed by separate bodies. To fragment the discharge of those functions will, in our view, lead to disputes dragging for years on end and thus defeating one of the crucial objectives of the CMA Act: efficiency. As such, these functions have, as of necessity, to be discharged by one body hence the overlap in the mandate granted to CMA.”

39. We are also persuaded that the process of becoming a board member or a group finance director of a bank and a listed company, like the CBKL is a rigorous one that involves stiff regulatory processes including approval of the CMA and the Central Bank of Kenya(CBK). Under Section 9A (1) of the Banking Act, it is provided relevantly that:“An institution shall ensure that no person is appointed or elected as a director or appointed as a senior officer unless the central Bank has certified the person as fit and proper to manage or control the institution.”

40. We have gone through the record and the transcribed proceedings of the Ad Hoc Committee and noted that Respondent provided no evidence that the Appellant was appointed by the Bank to serve in the capacities alleged. Interestingly, the Respondent as a statutory regulator was in a superior position to know that considering that under section 24(8) of the Capital Markets Act, any person licenced by the Authority shall not change its shareholders, directors, chief executives or key personnel except with prior confirmation in writing of the CMA.”

41. The Tribunal has also perused the minutes of the Board of Directors CBKL held on 14th May,2015 attached in both the Appellant and the respondent’s bundle and noted that among the directors and persons in attendance or absent with apologies, the name of appellant is not indicated anywhere.

42. Similarly, the attached Annual Reports and Financial Statements for Chase Bank Limited for 31st December 2014, 31st December 2012, and 31st December 2015 listed the directors and members of the various committees of the Board. Again, the Tribunal did not see the name of the appellant listed anywhere. The tribunal noted that according to the Bank’s structure, at least from the documents cited, there is no officer assigned the designation of Group Finance Director. The Bank however had a Group Manager-Finance, a position that was held by a Mr. A. Agumbi and not the Appellant.

43. The dates cited in those documents are in our view very relevant to the inquiry conducted by the respondent and could have given a clear picture of the Bank’s leadership at the time. Overall, we are persuaded that the Authority failed to discharge an evidentiary burden to prove that the Appellant was a Board member and the Group Finance Director of the CBKL as it had asserted in its NTSC.

44. On account of the foregoing, it is the Tribunal’s finding that that the decision of the Authority’s Ad Hoc Committee and the consequent enforcement action was founded on an erroneous assumption that the Appellant was a member of the board and the GFD of the CBKL. The CMA clearly failed to prove that the appellant serves the Bank as the Group Finance Director or a member of the Board of directors.

Issue No.2: whether the Appellant is culpable in the preparation and publication of false and misleading 2014 financial statements, which were part of the CBKL’s IM issued in 2015 and failing to disclose the information relating to the bonus payment of Kshs.1 Billion to Zafrullah Khan in a Supplementary IM. 45. The other issues for determination in this appeal is whether the respondent erred in making a finding that the Appellant is culpable for the preparation and publication of false and misleading 2014 financial statements, which were part of the CBKL’s IM issued in 2015, and failure to disclose the information relating to the bonus payment of Kshs.1 Billion to Zafrullah Khan in a Supplementary IM.

46. The Appellant has averred that he only became aware that his name was listed in the IM without his knowledge and consent and that he only came to know of it when the CMA sent the NTSC in 2021. In response the respondent submitted that with the Appellant’s rich experience in the Banking and investment sector, he ought to have known the accurate position in the items in the financial statements that were misclassified in the 2014 financial statements and which ended up in the IM.

47. The Respondent also submitted that the Appellant had actual knowledge of the bonus payment since he was a member of the Ad Hoc Remuneration Committee of the Board of CBKL which recommended the payment of the bonus. Accordingly, by failing to disclose the bonus payment of Kshs.1 Billion to Zafrullah Khan in a Supplementary IM, the Appellant did not act in good faith and he knew or ought to have known that he was not discharging his fiduciary obligations.

48. The Tribunal’s attention was drawn by the Respondent to page 99-101 of Respondent’s documents as the evidence of membership to the Ad Hoc Remuneration Committee of the CBKL. We perused the document and all we saw were Minutes of the Board of Directors Meeting Held on 14th May,2015 at 9. 00 am at the Villa Rosa Kempenski Fedora 1, Nairobi. The name of the Appellant appears nowhere in those minutes. In the absence of any other relevant evidence that properly linked the Appellant to the bonus issue and as an officer of the CBKL, we have to disagree with the findings of the Ad Hoc Committee that he had the knowledge and therefore culpable of non–disclosure publication of a false financial statements.

49. Additionally, we find as plausible, the Appellant’s explanation that he only became aware that his name was listed in the IM without his knowledge and consent and that he only came to know of it when the CMA sent the NTSC in 2021 and that he wrote back to the Respondent clarifying the same.

50. In law therefore, this Tribunal finds it unreasonable to hold, as the Ad Hoc Committee did, that the Appellant who was not proved to be a board member or such senior employee of the Bank and did not sign the IM, to be culpable of non-disclosure. We hold so because under section 30E(3) (b) of the Capital Markets Act, the law provides that:“Notwithstanding the provisions of sub-section (2), a person shall not be responsible for prospectus or a Supplementary prospectus-(a)…(b)under subsection (1)(b), (c) or (f) if such prospectus or supplementary prospectus is published without his knowledge or consent and on becoming aware of its publication, he or she gives a reasonable notice to the public and to the Authority that the prospectus or supplementary prospectus was published without his knowledge and consent.”

51. Further, rich experience in the banking and financial sector alone in our view cannot be the basis to hold that the Appellant knew the contents of the IM (the prospectus).

52. It is therefore clear to us that, from the inquiry and Ad Hoc Committee Proceedings conducted by the Respondent, that the Appellant was wrongly implicated and convicted by the CMA. No proper basis was laid out in law and evidence to proceed and sanction him under the Capital Markets Act.

Disposition 53. Consequent to the findings above, the Tribunal by a unanimous decision (Hon. G. Wang’ong’u having recused himself and Hon. J. Eboko abstaining), allows the appeal and makes the following orders:(a)The entire Ad Hoc Committee Enforcement Decision Report on Ken Obimbo of July 2022 and the consequent CMA’s Notification of Enforcement Action dated 2nd August,2022 on the Appellant is hereby set aside.(b)The Appellant is awarded costs of this appeal.It is so ordered.

DATED AND DELIVERED AT NAIROBI THIS 2ND DAY OF FEBRUARY 2024. 1. HON. PAUL LILAN, MBS - (CHAIRMAN)2. HON. DR. CONSTANCE GIKONYO - (MEMBER)3. HON. PAUL WANGA - (MEMBER)