NAIROBI, July 10 – The Capital Markets Authority (CMA) has defended its move to obtain, without consent, bank statements belonging to the former Managing Director of Nyaga Stock Brokers (NSB), Patrick Gakiavih.
CMA’s lawyer David Mwaura told Justice Joyce Khaminwa on Wednesday that the CMA Act allows the regulator to trace assets including bank accounts of persons implicated in fraud at the stock market.
Gakiavih’s lawyer Muciimi Mbaka wanted the court to expunge from its records the bank statements, arguing that they were illegally obtained and used against his client.
CMA also said there was no conflict of interests in the appointment of the statutory managers as alleged, amid claims that the Nairobi Stock Exchange (NSE) and the statutory manager Wycliffe Shamia, were not the right entities to run the brokerage firm.
“The issue of appointing a statutory manager should not arise, because it is not the first time that a company has been put under receivership,” Mwaura argued.
The lawyer defended the move to put the firm under receivership saying the company had been mismanaged necessitating the CMA takeover.
Mwaura insisted that the move was purely aimed at salvaging the troubled firm, and to recover the customer’s monies.
He also challenged the defence to clear the air on how a loan of Sh100 million, injected into the firm as additional capital, was used.
“The Sh100 million loan granted to this firm does not appear in the company’s internal records, which means it was not accounted for,” the lawyer asserted.
Gakiavih is accused of mismanaging the brokerage firm and fraudulently transferring over Sh523 million from the firm’s bank account and Sh76 million from the firm’s petty cash to his personal account.
He has also been accused of over-drafting his clients’ accounts and failing to remit fees to the regulator and the Investor Protection Fund between December 2007 and January 2008.
Gakiavih owned 99 percent of shares at the brokerage firm, the remainder of which were owned by his wife.
The CMA wants to freeze his accounts.
Nyaga Stock Brokers went under after plunging into a financial crisis amid allegations of irregularities.
The Court has in the meantime extended interim orders freezing his assets as earlier issued, until ruling on the matter on July 25th.