CMC shares screech to a halt with 7-day trading ban

September 16, 2011
Cars sold to the government undergo inspection at CMC

, NAIROBI, Kenya, Sep 16 – CMC Holdings’ shares have been suspended from trading on the Nairobi Stock Exchange for seven days after reports of a boardroom row and fraud claims involving ex-directors.

The directive from the Capital Markets Authority (CMA) comes a day after the regulator said it has launched a forensic audit into claims that two former directors opened offshore accounts where they stashed millions of shillings.

“Kindly note that CMC Holdings Ltd has been suspended with immediate effect for a period of seven days,” a statement from the Authority read.

CMC Group Chief Executive Officer Bill Lay kicked up the storm on Wednesday when he disclosed that two former directors opened secret accounts in the Island of Jersey where an estimated Sh240 million was stashed.

“Management continues to work on ways to repatriate these funds for the benefit of CMC shareholders,” Lay said at the time.

He further revealed that Andy Freight Forwarders, a company associated with the motor dealer’s immediate former chairman Peter Muthoka had overcharged CMC over half a billion shillings in 12 months.

This conflict of interest was unearthed in an internal audit conducted after the car dealer’s operational costs become untenable prompting the newly appointed MD to launch a probe.

The wrangles have in turn affected the share price which on Thursday shed off 2.26 percent of its value to close the day at Sh13.

Two hours after the opening of Friday’s trading session and prior to the suspension by the CMA, dealers say that only one transaction had passed.

And in a bid to uphold corporate governance in a market that in the last few years been dogged by claims of financial impropriety, the regulator has opted to ban the automobile dealer from the bourse.

This action is meant to protect shareholders and investors in general until CMA gets to the bottom of the matter and probably give CMC time to institute strong corporate governance structures which include the appointment of independent directors.

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