Investors will legitimately feel let down by the Capital Markets Authority, the regulator that apparently failed to detect or highlight the corporate governance malpractice at ARM Cement.
The revelations that cement maker ARM #ticker:ARM has been covering up debts amounting to Sh21.5 billion in its financial statements suggests an unacceptable regulatory failure.
Investors will legitimately feel let down by the Capital Markets Authority (CMA), the regulator that apparently failed to detect or highlight the corporate governance malpractice early enough.
Deloitte, which flagged the concealing of debts due from ARM’s subsidiary Maweni Limestone Limited, will also be hard-pressed to explain how the malpractice escaped its attention for so long.
Despite the accounting firm having audited ARM’s books for 10 years, it has only recently flagged the debts in its report explaining its withholding of an opinion on the cement maker’s 2017 annual report.
But the buck for this regulatory failure still stops at the CMA’s desk.
Far too often, the regulator has been found wanting in its surveillance system, only to emerge later to perform mortician duties in form of litigation.
ARM joins a growing list of companies whose financial health have failed on CMA’s watch.
The list includes Mumias #ticker:MSC, Uchumi #ticker:UCHM, Imperial Bank (bond) and Chase Bank (bond).
While the financial markets regulator owes it to investors to ensure companies observe good corporate governance, it is about time it was held to account to.
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