On Thursday 19th September 2024, the Capital Markets Tribunal under the chairmanship of Paul Lilan ruled that investigations carried out by the Capital Markets Authority (CMA) prior to issuance of a Notice to Show Cause are inquisitorial in nature. As such, persons aggrieved with the decision to investigate them ought to wait until CMA issues them with a Notice to Show Cause in order to demand to be furnished with reasons and particulars of the allegations against them. In this regard, they stated that they were guided by the judgement of the High Court (Lady Justice H.I. Ong’udi) in Hongo & 2 others vs Muthaura & 4 others (2022).
The Tribunal also held that the right to be given written reasons for the investigation under Article 47(2) of the Constitution arises if the right has been or is likely to be adversely affected by the administrative action. In other words, the act of investigating must have adversely affected the person’s right to fair administrative action or is likely to adversely affect their right to fair administrative action. In this regard, the Tribunal stated that in order to challenge the decision to investigate, persons under investigation need to show bias, procedural impropriety, ulterior motive, failure to take into account relevant matters, abuse of discretion or unreasonableness on the part of CMA.
Furthermore, the Tribunal ruled that CMA’s findings and recommendations on Corporate Governance with respect to a person under investigation cannot be used to determine an inquiry. The Tribunal stated that the inquiry and the evaluation on Corporate Governance are two distinct processes that are empowered by different sections of statute.
Additionally, the Tribunal ruled that an Advocate representing a party to proceedings can sign the Memorandum of Appeal even though Rule 4(3) of the Capital Markets Tribunal Rules 2002 states that
For further info, contact Jillian Ndirangu or Peter Mumu.
the Memorandum of Appeal shall be signed by the appellant, if the appellant is an individual, or by a director and the Chief Executive officer of the Corporation.The Tribunal however acknowledged that an advocate signing a Statement of Facts will expose the advocate to the risk of being invited to the witness box. In this regard, the Tribunal opined that the Statement of Facts is equivalent to a witness statement.
For further info, contact Jillian Ndirangu or Peter Mumu.
