PAN African Exchange (PANEX) has raised a complaint against Securities and Exchange Commission chief executive officer Phillip Chitalu over failure to declare interest and insider trading.
Chitalu is said to be a shareholder in a company regulated under SEC called ‘Bond and Derivatives Exchange Limited (BADEX)’ which deals in commodities, bonds and derivatives, which is the same business as PANEX.
According to a complaint letter addressed to the SEC board chairperson, PANEX, through its lawyers Paul Norah and advocates, alleged that Chitalu owns shares in BADEX through a layered company called Dejavu Financial Services Corporation Limited.
It is alleged that Chitalu has dealt with issues pertaining to PANEX and the board without disclosing the conflict of interest.
“By virtue of being a substantial shareholder in Badex, a Director in Dejavu Financial Services Limited as well as being a director and chief executive officer of the Securities and Exchange Commission, Mr. Chitalu has a serious undisclosed conflict of interest and he has grossly abrogated both the Companies Act and the Securities and Exchange Act,” the letter read.
In the complaint letter, PANEX stated that according to section 107 of the Companies Act, Chitalu was given an obligation as a director to avoid a situation in which he has or is likely to have, a direct or indirect interest that conflicts, or is likely to conflict, with the interests of the company.
The company stated that Chitalu undermined his duties as a director of SEC and its regulated entity, Dejavu Financial Services Limited and has not disclosed this to the board or PANEX, who run a directly competing company in bonds and derivatives.
“He has, further, not disclosed this to yourselves and to our Client, who runs a directly competing Company in bonds and derivatives. He has a duty to disclose this and has either failed, neglected or refused to do so over the years,” read the letter.
They further alleged that the actions are tantamount to insider trading which is prohibited by the Securities Act.
“You will agree that his actions are nothing short of ‘insider trading’ which is proscribed by the Securities Act and all tenets of corporate governance. This is also evidenced by the fact that he has persistently requested for the Business Model and business processes for PANEX, which our Client availed to him as a regulator. This is evidenced in the numerous correspondences from the SEC to PANEX (authored by Mr Chitalu) and the Affidavits he has previously sworn in the High Court and the Capital Markets tribunal, all against PANEX. He has also not hesitated to use his discretion against PANEX in all matters, when he is placed in such a situation,” read the letter.
“You will note that Mr Chitalu has recently requested, through SEC Legal Counsel, to have the above-mentioned print outs expunged from the record at the Capital Markets Tribunal. This, in our Client’s view, is an attempt to cover up the aforesaid conflict of interest, lack of independence of judgment and insider trading in the manner that he has conducted the affairs of the SEC and our Client’s case. This all, at the expense of the publicly funded SEC, investment and employment of employees at PANEX.”
They hoped that the board would act adequately to save the capital markets from unfair and illegal practices.
“That said, we wish to hereby bring this ‘gross breach of a Director’s duty to act with good faith’ to the attention of the SEC Board of Directors. We expect that the Board will see through Mr Chitalu’s actions and react promptly in order to save the Capital Markets from unfair and illegal practices,” read the letter.
