A Nairobi businessman has been fined Sh 208 Million and banned by Capital Markets Authority (CMA) from the industry for 10 years for deliberately manipulating the price of government bonds in 2016 and 2017 in an attempt to profit from what is known as Front running.
According to CMA, Mr Rodrick Muhoro has been fined twice the amount he received from irregular trading and banned him from conducting bonds trading for a period of 10 years.” CMA announced.
Mr. Muhoro allegedly conspired with brokers to defraud investors in bond transactions undertaken between January 2016 and June 2017 through front running.
According to reports, this happened when Mr Muhoro colluded with fixed income dealers, David T Maena of CBA Capital and Stephen Ngunje of Africa Investment Bank through the creation of artificial arbitrage opportunities, thereby realising a capital gain of Kshs104 million by taking advantage of the price differential before the client orders were executed.
The gains would later be shared between Mr. Muhoro and the two fixed income dealers which is in contravention of provisions of the Capital Markets Act.
Front running is the illegal practice of purchasing a security based on advance non-public information regarding an expected large transaction that will affect the price of a security.
Front running is considered as a form of market manipulation and insider trading because a person who commits a front running activity expects security’s price movements based on the non-public information.
DPP will now take over the case for consideration of criminal investigations on market manipulation while the Asset Recovery Agency will be involved to trace and recover assets allegedly bought with illegal capital gains.
Institute of Certified Public Accountants of Kenya will also be involved in disciplinary action for professional misconduct.
PRESS RELEASE: CMA is set to recover Kshs208 million from illegal trading in fixed income securities pic.twitter.com/brQHAxaSfR
— Capital Markets Authority_Kenya (@CMAKenya) May 15, 2019
This comes just days after reports of a Kenyan forex trader conned Ugands Ksh 53 million (Ush 2 Billion) and disappeared in thin air.
Kenya has literally gone international with the con game.
David Kimani, the proprietor of Arua Forex Bureau is wanted by Ugandan police after allegedly defrauding his customers Ush 2 billion (Ksh 53 Million) in Arua town before fleeing east to Kenya.
The foreign currencies dealer is said to have worked in Arua for about 15 years and had made close links with businessmen in the area and West Nile region.
According to reports, he had collected the money from his clients “in order to buy them foreign currencies” before he went missing.
Ugandan newspaper The Observer, reports that Mr Kimani drove to Uganda border town of Malaba on Sunday last week where he abandoned his Land Cruiser Prado vehicle.
Some of employees in Arua town reported for work on Monday morning as usual, but waited in vain for his arrival.
Kimani later told them in phone calls that he is in Kenya and that they should not report to work until he returns – possibly in two days.
A guard at the bureau told a reporter that Kimani had collected a fully packed bag from the bureau.
“The workers came and waited here in vain until after sensing something unusual, they went back home, up to now that’s why the place is still closed,” the guard told Uganda Radio Network (URN).
The newspaper reported that more than 30 businessmen stormed the forex bureau when news of Kimani’s disappearance spread in Arua town.