Regulator Cracks Down on Former Executives

NAIROBI – In a decisive move aimed at restoring confidence in Kenya's capital markets, the Capital Markets Authority (CMA) on Wednesday, November 19, 2025, imposed a Sh5 million fine on former Chase Bank Chairman Zafrullah Khan and banned him from holding any director or key personnel position in a publicly-listed company for a decade. The ruling concludes a nearly decade-long investigation into the issuance of a Sh4.8 billion corporate bond in 2015, just months before the bank's dramatic collapse.

Two other senior executives were also sanctioned. Makarios Agumbi, the former General Manager for Finance, was fined Sh3.5 million and disqualified for five years. James Mwaura, who served as General Manager for Corporate Assets, received a Sh2.5 million fine and a two-year ban. The CMA's Ad Hoc Committee, which concluded its hearings on Monday, November 17, 2025, found the trio responsible for significant governance failures and breaches of capital markets regulations.

False Statements and Conflicts of Interest

The regulatory body's investigation centred on the Sh10 billion medium-term note program, of which the first tranche of Sh4.8 billion was issued and listed on the Nairobi Securities Exchange on June 22, 2015. The CMA committee established that Khan failed to exercise effective oversight, leading to the publication of false and misleading financial statements in the bond's Information Memorandum provided to investors.

Specifically, the investigation found that the bank's liquidity position was overstated by Sh2.15 billion, a material misrepresentation that influenced investors' decisions. Furthermore, Khan was cited for a severe conflict of interest. He chaired and participated in the approval of a Sh1 billion bonus for himself, which was paid as a lump sum contrary to board resolutions that stipulated it be paid over five years. The CMA noted that Khan failed to disclose this material information to the market.

Agumbi was found to have facilitated the preparation of the misleading financial statements and unprocedurally paid Khan's bonus. Mwaura was penalised for his role in misclassifying and failing to disclose related-party loans, which distorted the bank's true financial health. All three former executives are also required to undergo corporate governance training before they can be considered for future roles in Kenya's capital markets.

A Long Road to Accountability

The enforcement action follows a protracted legal battle. Khan, Agumbi, and Mwaura had initially challenged the CMA's proceedings by filing a case at the Capital Markets Tribunal in 2022. However, the Tribunal, in a ruling on February 2, 2024, ordered the three to appear before the CMA's Ad Hoc Committee, paving the way for the final hearings and subsequent penalties.

Chase Bank was placed under receivership by the Central Bank of Kenya (CBK) on April 7, 2016, after a run on the bank was triggered by reports of its financial troubles, locking up billions in depositor funds. The collapse was a major shock to Kenya's banking sector, which also saw the failure of Imperial Bank and Dubai Bank around the same period.

The Kenya Deposit Insurance Corporation (KDIC) was appointed as the receiver. In a landmark transaction in August 2018, SBM Bank (Kenya) Ltd, a subsidiary of the Mauritian SBM Holdings, acquired 75% of Chase Bank's assets and liabilities, allowing a significant portion of depositors to access their funds. The remaining 25% of assets and liabilities remained with the KDIC for liquidation.

Implications for Kenya's Financial Sector

This ruling by the CMA is a critical development for corporate governance in Kenya. It sends a strong message to corporate directors and senior management about their accountability in overseeing company operations and ensuring the accuracy of information disclosed to investors. The penalties, though concluding a long-standing case, are seen as a vital step in holding individuals responsible for one of the country's most significant banking failures.

The case highlights the crucial role of regulatory bodies like the CMA in protecting investors and maintaining the integrity of the financial markets. For thousands of Chase Bank depositors and bondholders who suffered financial losses, the decision represents a measure of justice and underscores the severe consequences of corporate malfeasance. The outcome is expected to influence boardroom conduct and regulatory compliance across the country, reinforcing the principle that oversight and transparency are paramount for institutions seeking to raise public funds.