NAIROBI, Kenya, Nov 19 – The Capital Markets Authority (CMA) has imposed a financial penalty of Sh10 million on Ernst & Young LLP (EY) over its role as Reporting Accountant during the scandal-ridden Uchumi Supermarkets Limited (USL) 2014 Rights Issue, marking one of the regulator’s most consequential enforcement actions targeting a top audit firm.
The move follows a years-long inquiry into USL’s financial disclosures, which revealed what CMA describes as serious misrepresentations in the retailer’s financial statements and Information Memorandum.
After reviewing findings from its Show Cause proceedings, the regulator concluded that EY failed to ensure adequate and accurate disclosure during the period.
“In line with its investor protection and oversight mandate, the Capital Markets Authority (CMA) has taken enforcement action against the EY, who were then the Reporting Accountant for the Uchumi Supermarkets Limited (USL) Rights Issue.”
“Following the Notice to Show Cause (NTSC) hearing and consideration by an Ad Hoc Committee, the Authority has imposed a financial penalty of Kshs.10,000,000.00 against EY.”
Beyond the penalty, the Authority has directed EY to ensure all staff involved in auditing listed companies, CMA licensees, and issuers undergo remedial training for the next three years.
The training is to be supervised by another EY member firm, with progress reports submitted to CMA and the Institute of Certified Public Accountants of Kenya (ICPAK).
Failure to comply could see the audit giant barred from offering services to listed firms and licensed entities.
CMA has also recommended disciplinary action by ICPAK against EY and two former audit engagement partners Michael Kimoni and Joseph Cheborbor for failing to ensure full disclosure of material facts in USL’s 2014 financials.
The enforcement action follows a protracted legal battle.
EY had sought to block the proceedings through a 2016 High Court petition, but both the High Court and Court of Appeal upheld CMA’s mandate, paving the way for the final determination.
The Authority has previously sanctioned former USL board members and senior management involved in the rights issue.
