A Reckoning for a Scandal

NAIROBI—The Capital Markets Authority (CMA) has imposed fines totalling Sh11 million and lengthy market bans on three former senior executives of the collapsed Chase Bank Kenya Limited (CBKL), concluding a protracted investigation into the lender's ill-fated 2015 bond issue. In a statement released on Wednesday, November 19, 2025, the regulator detailed sanctions against former Chairperson Zafrullah Khan, former General Manager for Finance Makarios Agumbi, and former General Manager for Corporate Assets James Mwaura for their roles in publishing false and misleading information to investors.

The enforcement action is one of the most significant moves by the CMA against individuals involved in a bank failure, signalling a stricter stance on corporate accountability in Kenya’s capital markets. This decision revisits a painful chapter in the nation's banking history, culminating from an inquiry into the actions that preceded the bank's dramatic collapse on April 7, 2016, when it was placed under receivership by the Central Bank of Kenya (CBK) due to severe liquidity problems.

The Flawed Bond and Breaches of Trust

The CMA's investigation centred on the Sh10 billion medium-term note (MTN) programme launched in 2015, which was intended to raise capital to strengthen the bank's finances and fund its expansion. The first tranche of the bond successfully raised Sh4.8 billion from investors and was listed on the Nairobi Securities Exchange on June 22, 2015. However, less than a year later, the bank failed, locking up Sh95 billion in depositor funds and sending shockwaves through the economy.

The CMA Board Ad Hoc Committee, which concluded its hearings on November 17, 2025, found the three executives liable for multiple breaches of capital markets regulations. The core of the case was the Information Memorandum (IM) issued to the public, which contained falsified financial statements that misrepresented the bank's health. An investigation revealed that the bank's liquidity position was overstated by Sh2.15 billion, a material misrepresentation that influenced investors' decisions.

Sanctions and Specific Failures

The heaviest penalties were imposed on the former chairperson, Zafrullah Khan, who was fined Sh5 million and barred from serving as a director or key personnel of any CMA-licensed entity for ten years. The Committee found he failed to exercise effective oversight, leading to the publication of the misleading statements. Furthermore, Khan was cited for a severe conflict of interest, having chaired and participated in the approval of his own bonus without proper disclosure.

Makarios Agumbi, the former General Manager for Finance, received a Sh3.5 million fine and a five-year disqualification. He was found to have facilitated the preparation of the misleading financial statements and for the unprocedural lump-sum payment of Khan's bonus, which was contrary to a board resolution.

James Mwaura, the former General Manager for Corporate Assets, was fined Sh2.5 million and banned for two years. His sanctions relate to his role in enabling the publication of misstated information, including the misclassification and non-disclosure of related-party loans disguised as "Musharakah Investments," and his participation in the irregular bonus payments.

In addition to the financial penalties and bans, all three individuals have been directed to undergo corporate governance training before they can be eligible to participate in capital markets again.

The Aftermath and Path to Recovery

The collapse of Chase Bank was attributed to poor corporate governance, particularly the issuance of massive, under-reported insider loans to directors and related entities, which stood at Sh13.62 billion. The bank's failure, alongside that of Imperial Bank and Dubai Bank, triggered a crisis of confidence in Kenya's banking sector.

In the years following the collapse, a resolution was reached to protect depositors. In August 2018, SBM Bank Kenya, a subsidiary of the Mauritian SBM Group, completed the acquisition of a significant portion of Chase Bank's assets and assumed 75% of its liabilities. This transaction provided a lifeline for depositors, who gained structured access to their funds, and saw SBM Kenya grow into a top Tier 2 bank. The remaining assets and liabilities of Chase Bank were transferred to the Kenya Deposit Insurance Corporation (KDIC) for liquidation. The CMA's latest action is a critical step in holding accountable those whose decisions led to significant losses for investors and depositors, reinforcing the regulator's mandate to protect market integrity.