Capital Markets Authority v Popat & 8 others (Civil Appeal 35 of 2017) [2019] KECA 592 (KLR)
The bottom line
#Kenya's Court of Appeal ruled the Capital Markets Authority can both approve securities and investigate wrongdoing over them, so its disciplinary case against Imperial Bank's ex-directors resumes.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the statutory mandate of the CMA is deliberately designed to empower it to impartially investigate and take enforcement action against errant players in the capital markets, notwithstanding the duality of its mandate
- 2.Whether the learned judge erred in his interpretation of delegation of the CMA's roles under section 11A of the Capital Markets Act
- 3.Whether the petition was properly before the High Court notwithstanding the existence of the Capital Markets Tribunal
- 4.Whether the appellant's actions violated the respondents' rights under article 47 of the Constitution and the Fair Administrative Action Act (cross-appeal)
Key legal issues
#Whether CMA's dual mandate of approving securities and investigating/enforcing against breaches creates a reasonable apprehension of bias
It does not; the statutory authorisation of overlapping functions is an exception to the nemo judex rule, and the High Court's finding of apprehension of bias was set aside
The court adopted the objective test of reasonable apprehension of bias from Kalpana Rawal v JSC and Anyang' Nyong'o, and relied on the Canadian authority in Brossea (approved in the Shollei case) that statutory authorisation of overlapping functions is an exception to the requirement of separation between investigation and adjudication. A fair-minded observer must bear in mind the statutory architecture of the Capital Markets Act, which expressly empowers CMA both to approve securities and to investigate and enforce against directors of approved issuers.
Whether the High Court had jurisdiction over the constitutional petition despite the Capital Markets Tribunal
The High Court was properly seized, because the claim was that constitutional rights had been violated; that holding is limited to constitutional claims and does not limit CMA's or the Tribunal's statutory mandates
Relying on its own earlier decision in Capital Markets Authority v Jeremiah Gitau Kiereini, the court affirmed that where a claim is constitutional in form and substance under article 47, the High Court is the proper forum by virtue of article 165(3); no other adjudicative body shares that mandate. However, the finding does not restrict CMA or the Tribunal from performing their statutory functions provided they do not trample on constitutional rights.
Whether the trial judge's statement on delegation under section 11A and reference to the Capital Markets Tribunal was a valid holding
The statement was obiter dictum; in any event a delegation does not prevent the Authority from performing the delegated function, and the Authority itself cannot refer a matter to the Tribunal
The court agreed with the appellant that the delegation issue was neither pleaded nor argued, and following the principle in Omondi v Guilders International Bank that courts should not base decisions on unpleaded issues, treated the judge's direction as obiter. It corrected the judge's reading of section 35A(4): only an aggrieved party, not the Authority, may go to the Tribunal.
Whether CMA breached article 47 fair administrative action obligations (cross-appeal)
No breach; the respondents were notified of allegations, afforded a hearing, given the evidence to be relied on, notified of the right to call witnesses and legal representation, and accommodated with adjournments
The court found the respondents were given all essential materials and procedural protections required by article 47 and the Fair Administrative Action Act. Hearing dates set by an adjudicative body cannot always accommodate a party's convenience, and the several adjournments granted showed accommodation rather than unfairness. The discrimination/selective prosecution claim failed because other participants, including transaction advisers, had also been summoned.
Legal principles established
#- Where a statute expressly authorises a regulator's overlapping investigative and enforcement (and approval) functions, the exercise of those dual functions does not of itself give rise to a reasonable apprehension of bias.
- The test for apprehension of bias is objective: whether a fair-minded and informed observer, having considered all the relevant facts, would conclude that there was a real possibility of bias.
- The High Court has exclusive jurisdiction under article 165(3) to adjudicate alleged violations of fundamental rights and freedoms, and the existence of an alternative statutory remedy such as the Capital Markets Tribunal does not oust that jurisdiction where the claim is constitutional in form and substance.
- A delegation by the Authority under section 11A of the Capital Markets Act does not prevent the Authority from performing the delegated function, and under section 35A(4) only an aggrieved party - not the Authority itself - may appeal to the Capital Markets Tribunal.
Court orders
#- 1.The appeal is allowed to the extent that the High Court's finding that the respondents' rights under article 47(1) of the Constitution are under a threat of violation by the appellant is set aside
- 2.The order of certiorari quashing the notice to show cause letters issued on May 6, 2016 is set aside
- 3.The appellant is at liberty to continue with the administrative proceedings it had commenced against the respondents
- 4.The cross-appeal is dismissed in its entirety
- 5.The appellant is awarded the costs of the petition before the High Court as well as the costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya
- Jurisdiction invoked
- First appellate jurisdiction over the High Court petition invoking article 165(3) of the Constitution; respondents' cross-appeal filed under rule 93 of the Court of Appeal Rules
Relief refused
#Cross-appeal grounds (violation of article 47(1), article 50, discrimination, inconvenience of hearing dates, adequacy of documents furnished)
The respondents were afforded fair administrative action: notified of allegations, afforded opportunity to be heard, furnished with necessary materials, and adjournments were accommodated
Costs
The appellant is awarded the costs of the petition before the High Court as well as the costs of this appeal.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
in the exercise of its statutory mandate, the CMA is able, and is expected to make unprejudiced judgment on matters that it has investigated, notwithstanding the duality of its mandate. The statute expressly authorizes the overlapping functions.
The finding on apprehension of bias by the High Court must therefore be set aside, which we hereby do.
The existence of an alternative remedy, in this case the Tribunal, would not be efficacious because the High Court does not share with it the powers under article 165 of the Constitution.
It does not in any way limit the mandate of CMA or the Tribunal to perform their statutory duties and functions; as long as in the course of executing that mandate they do not trample upon constitutional rights and freedoms of parties before them.
For avoidance of doubt, the appellant shall be at liberty to continue with the administrative proceedings that it had commenced against the respondents.
The appellant is awarded the costs of the petition before the High Court as well as the costs of this appeal.
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (1)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Judicial Service Commission & another v LMN[2025] KESC 53 (KLR)15 Aug 2025
Cite this brief
#Cite this brief
Caselaw, "Capital Markets Authority v Popat & 8 others (Civil Appeal 35 of 2017) [2019] KECA 592 (KLR)", Case Analysis (2019). . Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/592/eng@2019-06-28
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.