Four directors of SME lender Real People have been fined a total of Sh15 million for diverting customer funds to plug a financial hole in the entity’s South Africa arm effectively leaving the Kenyan unit in distress.
The four are Real People Kenya Limited (RPKL) board chairman at the time Arthur Arnold; board member and CEO then Neil Grobbelaar, board member and group chief financial officer at the time Arumugam Padachie, and Bruce Schenk, who was the alternate director to Neil Grobbelaar on RPKL board and executive director of Real People Investment Holdings Limited (RHIPL), South Africa at the said time.
The Capital Markets Authority (CMA) singled out the four for their misapplication of KES1.3 billion that the firm raised in Kenya in 2015 through medium term notes (MTN).
Arthur Arnold and Neil Grobbelaar were slapped with a fine of Sh5 million each while Arumugam Padachie and Bruce Schenk were fined Sh2.5 million each by the markets regulator.
The four were also disqualified from being a director or key personnel of any issuer, licensed or approved person in the Kenyan capital market. CMA said that their disqualification will only be lifted once the bond holders recover their money in full together with the accrued interest.
In 2015, CMA gave RPKL the greenlight to raise a KES5 billion through medium term notes. The first tranche issue of KES2.5 billion raised KES1.6 billion but RPKL fell into financial distress soon after even struggling to meet its medium term notes obligations, leading to the extension of redemption dates beyond the initial maturity dates of 6 August 2018 and 3 August 2020, for the 3-year and 5-year notes, respectively.
This called for investigations whereby the markets regulator unearthed a plan involving RPKL and RPIHL, South Africa to use the MTN proceeds to settle an intercompany loan even before the application, approval, and issue of the medium term notes.