NAIROBI, Kenya – The Capital Markets Authority (CMA) has penalised Ernst & Young (EY) Kenya Sh10 million for its role as the reporting accountant in Uchumi Supermarkets' ill-fated 2014 rights issue. The enforcement action, announced on Wednesday, November 19, 2025, concludes a protracted investigation and legal battle over the audit firm's failure to ensure accurate financial disclosures, which preceded the retailer's collapse and resulted in massive losses for investors and suppliers.

In a statement, the CMA confirmed the penalty followed a Notice to Show Cause hearing and a review by an Ad Hoc Committee, which found EY culpable of professional failures. The regulator determined that the Information Memorandum for the rights issue, which EY signed off on, contained "serious misrepresentations" of Uchumi's financial health. The investigation, which began in 2015, was delayed by a legal challenge from EY, which sought to halt the proceedings in 2016. However, the High Court and subsequently the Court of Appeal, on February 3, 2022, affirmed the CMA's mandate to proceed with the enforcement action.

The Ill-Fated Cash Call

In late 2014, Uchumi Supermarkets, then a household name in East Africa, sought to raise capital for regional expansion and to refurbish existing stores. The rights issue, targeting Sh896 million, was overwhelmingly oversubscribed, raising approximately Sh1.6 billion from optimistic shareholders. The funds were meant to finance the opening of new branches in Kenya, Uganda, Tanzania, and Rwanda. However, subsequent investigations revealed that the proceeds were allegedly diverted to pay existing supplier debts rather than for the stated expansion plans, a critical detail not adequately reflected in the audited financials.

Within a year of the cash call, in June 2015, Uchumi's board dismissed its Chief Executive Officer, Jonathan Ciano, for gross misconduct, and the retailer's deep-seated financial troubles became public. The company soon spiralled into insolvency, leading to the closure of all its branches in Tanzania and Uganda in October 2015 and its eventual collapse in Kenya, leaving a trail of billions in unpaid supplier debts and worthless shares for investors who had participated in the rights issue.

Heightened Scrutiny on Auditors

Beyond the financial penalty, the CMA has imposed strict remedial measures on EY. The authority has directed the firm to ensure all staff involved in auditing publicly listed companies and CMA licensees undergo mandatory training for the next three years. This training must be supervised by another EY member firm, with compliance reports submitted to both the CMA and the Institute of Certified Public Accountants of Kenya (ICPAK). Failure to comply could result in EY being barred from providing professional services to entities regulated by the CMA.

The CMA has also recommended that ICPAK, the professional body for accountants in Kenya, institute disciplinary proceedings against EY as a firm and against Michael Kimoni and Joseph Cheborbor, the two engagement partners responsible for the Uchumi audits between 2010 and 2015. This action places the role of auditors in Kenya's corporate governance framework under sharp focus, echoing public outcry following the collapse of other major companies like Nakumatt, Chase Bank, and Imperial Bank, where the accuracy of audited financial statements was questioned.

The ruling is one of the most significant enforcement actions taken by the CMA against a 'Big Four' audit firm and signals the regulator's commitment to protecting investors and holding gatekeepers accountable. The Authority has previously sanctioned former board members and senior management of Uchumi for their roles in the scandal. As of the time of publication, EY Kenya had not issued a public statement in response to the CMA's decision. FURTHER INVESTIGATION REQUIRED.