Regulator slams 90-day break for CMC shares

September 27, 2011

, NAIROBI, Kenya, Sep 27 – Kenya’s market regulator has suspended the trading of motor vehicle dealer CMC Holdings Ltd shares for a further 90 days to protect shareholder interests.

The extension of the suspension of the shares is meant to enable the Capital Markets Authority to carry out further investigations over fraud allegations as well as boardroom wrangles that have rocked the company over recent months.

The news of the extension comes after the expiry of an initial seven-day suspension issued by the CMA on September 16.

“The extended suspension period is expected to facilitate ongoing investigations by CMA of allegations relating to CMC Holdings’ conduct of its affairs within the mandate of CMA and to sustain investor confidence in the capital markets,” CMA Chief Executive Officer Stella Kilonzo said.

At the time of suspension the shares were trading at Sh12.90. Shareholders will not be able to sell or buy the car dealer’s shares during this period.

CMC Chief Executive Officer Bill Lay brought to the fore claims that an internal audit had uncovered evidence of clandestine off shore bank accounts in the Island of Jersey (United Kingdom) operated by two former directors for many years.

While investigations are still ongoing as to how much had been siphoned off shore, one account is said to have Sh240 million.

Prior to the matter being taken up by the CMA for further investigations, Lay had said that they were working on ways of having the money repatriated to the company to boost its business growth.

“Investigations are still going on to understand the extent of the illegal transactions with the aim of recovering the money that belongs to CMC shareholders,” Lay said on September 14.

The management team at CMC led by Lay is currently implementing a business transformation program that has been endorsed by the regulator as it seeks to boost its operational efficiency.

Corporate governance issues have also rocked the automobile dealer. This was made clear when the board suspended Peter Muthoka as chairman for his involvement as Andy Freight Forwarders chairman and CEO.

The logistics company headed by Muthoka is also said to have been overcharging CMC for its services by between Sh1.5 billion and Sh2billion in the last five years.

CMA regulations require that the board of a public company be chaired by a non-executive and independent director who is defined, among other criteria, as not having had any business relationship with the company other than service as a director.

Muthoka was subsequently replaced by Joe Kibe as chairman of CMC Holdings.

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