Stifling Uganda's Secondary Bond Market: The Case Of David Chandi Jamwa

The recent decision of the Ugandan Court of Appeal to uphold a 12-year custodial sentence against a former managing director of the National Social Security Fund ("NSSF") has sparked much debate among finance and legal professionals. Speculation is rife on the impact the decision will have on fund managers (falling within the scope of the Anti-Corruption Act, 2009), as they trade on the secondary bond market.

In this case, David Chandi Jamwa, the appellant, was charged with abuse of office and causing financial loss contrary to the Anti-Corruption Act. The case against him was that he authorised the sale of government bonds held by NSSF before maturity (23 to 145 days) and caused a loss.

The trial court convicted Mr Jamwa for causing financial loss and acquitted him of the offence of abuse of office. He appealed the conviction and the State cross-appealed the acquittal.

Under the Anti-Corruption Act, a person is guilty of causing financial loss if, while in the employment of the government, a bank, a credit institution, an insurance company or a public body, he or she commits any act (or omission) knowing or having reason to believe that his or her act (or omission) would cause financial loss to his or her employer.

In his defence, Mr Jamwa argued that he had sold the bonds before their maturity date in execution of a board policy on re-alignment of NSSF's investments. He added that there was no evidence to prove that he knew selling the bonds before their maturity date would cause financial loss to his employer. He also argued that there was no loss, as the price at which the bonds were sold was still higher than that at which they were bought.

The State argued that there was a guaranteed return on the bonds at maturity and by selling before maturity, Mr Jamwa knew that a loss would occur. The State pointed out procedural irregularities in the sale. For example, the consent of the chief investment officer, which was a prerequisite to Mr Jamwa's authorisation to sell the bonds, came two days after Mr Jamwa authorised the sale. The State also argued that at the time of the sale, NSSF had no urgent need for cash.

The Court of Appeal held that the sale of the bonds before their maturity occasioned financial loss to NSSF and that the bonds were sold at a price higher than the...