Press Release

The Capital Markets Authority (CMA) takes enforcement action against Board Members of Real People Kenya Limited (RPKL) and Real People Investment Holdings Limited (RPIHL) South Africa for the misapplication of Ksh1.3 billion Medium Term Notes (MTN) proceeds raised in 2015.

Nairobi, 31 March 2021…In line with its investor protection mandate, the CMA has taken enforcement action against former board members of RPKL (the MTN Issuer) as well as current and former board members of RPIHL, South Africa (Shareholder of the MTN Issuer) for their role in the misapplication of the Ksh1.3 billion MTN proceeds.

CMA has taken enforcement action against:

Mr. Arthur Arnold, the RPKL Board Chairman at the material time, who has been fined KES 5 million and disqualified from being director or key personnel of any issuer, licensed or approved person in the Kenyan capital market. The disqualification will only be lifted once the MTN holders recover their money in full together with the accrued interest.

Mr. Neil Grobbelaar, a RPKL Board Member and Chief Executive Officer of RPHIL at the material time who has been fined KES 5 million and disqualified from being a director or key personnel of any issuer, licensed or approved person in the Kenyan capital market. The disqualification will only be lifted once the bond holders recover their money in full together with the accrued interest.

Mr. Arumugam Padachie, RPIHL Board Member and Group Chief Finance Officer at the material time has been fined Ksh2.5 million and disqualified from being director or key personnel of any issuer, licensed or approved person in the Kenyan capital market. The disqualification will only be lifted once the bond holders recover their money in full together with the accrued interest.

Mr. Bruce Schenk, the alternate director to Neil Grobbelaar on RPKL board and Executive Director of RHIPL at the material time who has been fined Ksh2.5 million and disqualified from being director or key personnel of any issuer, licensed or approved person in the Kenyan capital market. The disqualification will only be lifted once the bond holders recover their money in full together with the accrued interest.

In 2015, CMA had approved a Ksh5 billion MTN Programme to be issued by RPKL. The first tranche issue of KES 2.5 billion raised Ksh 1.6 billion. Immediately thereafter, RPKL started experiencing financial distress and had been unable to meet its MTN obligations leading to extension of redemption dates beyond the initial maturity dates of 6 August 2018 and 3 August 2020, for the 3-year and 5-year Notes, respectively.

CMA initiated an investigation into the matter and noted that there appeared to have been a plan involving RPKL and RPIHL, South Africa to use the MTN proceeds to settle an intercompany loan even before the application, approval, and issue of the MTN.

CMA then issued Notices to Show Cause to Board Members and Senior Management of RPKL and RPIHL. An Ad hoc Committee of the CMA Board was appointed to hear and determine the allegations. The Ad hoc Committee included Mr. James Ndegwa, CMA Board Chairman; Dr. Thomas Kibua, CMA Board Member; Mr. John Birech, CMA Board Member; Retired Chief Justice Dr. Willy Mutunga; FCPA Dr. James McFie; FCPA Anne Eriksson; and Ms. Patricia Kiwanuka.

Out of the 12 NTSC Recipients, seven appeared before the Ad hoc committee. The other five filed a case at the Capital Markets Tribunal (Tribunal). After the conclusion of the Administrative hearings, the Ad hoc Committee determined that that there was lack of effective oversight on the part of RPKL board on the application of MTN Proceeds. The approved and published Information Memorandum (IM) dated June 25, 2015, provided that the MTN proceeds would be used by RPKL for lending to clients in the small and micro sized enterprises (MSME) sector in Kenya. On the contrary, MTN proceeds were used to settle Related Party Loan in South Africa.

No enforcement action was taken against Mr. James Mwai Mbui, former RPKL Chief Information Officer, Mr. Bruce Evans, former RPIHL Group Head of Corporate Finance and Mr. Werner Nel, former RPHIL Group Head of Treasury.

ENDS

BACKGROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY

The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact: Antony Mwangi, Head of Corporate Communications on This email address is being protected from spambots. You need JavaScript enabled to view it.

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