This archive report was first published on 27 September 2019.
On September 20, 2019, KCB Group appointed receiver Ponangipalli Venkata Ramana Rao to take over Mumias Sugar Company, citing the miller's default on loans amounting to Sh12.5 billion.
However, KCB failed to disclose the receivership immediately, as required by Kenya's securities law, allowing unsuspecting investors to buy Mumias Sugar shares on September 20 and 23, 2019.
The shares were sold at a price of between Sh0.27 and Sh0.28, with an average volume of 218,066 shares dealt over the three days, significantly above the normal average of 139,000 units.
The sellers managed to avoid the fate of more than 130,000 investors whose wealth remains locked up in the miller after the suspension.
Regulations set by the Capital Markets Authority (CMA) require listed firms to disclose material events immediately to enable investors make informed decisions when buying or selling shares.
Analysts say KCB and the receiver manager had a duty to make the prompt disclosure of the receivership, as was the case in the collapse of ARM Cement and Deacons East Africa.
“An issuer shall disclose all material information and make a public announcement of… the appointment or imminent appointment of receiver manager or liquidator of the issuer or any of its subsidiaries,” the CMA rules stipulate.
