Public censure of Minmet plc
The London Stock Exchange ("LSE") actively monitors compliance with the AIM Rules for Companies ("AIM Rules") and the AIM Rules for Nominated Advisers ("Nomad Rules") and can take action, either privately or publicly, where AIM companies or their nominated advisers breach those rules.
Since the introduction of the new AIM Rules and Nomad Rules in February 2007, seventeen companies have received censures from the LSE for violations of the rules. However, despite criticism only 3 companies have received public censures from the LSE, as the regulator has shown a preference for privately reprimanding companies which they believe allows them to deal with violators in a more "timely and effective manner". As such, public censure has been reserved for the most serious breaches of the AIM Rules and Nomad Rules and until the beginning of December 2008 only SubSea Resources plc and Meridian Petroleum plc had publicly been on the receiving end of the LSE's wrath.
On 4 December 2008, Minmet plc became the latest company to be publicly censured for its breaches of the AIM Rules between October 2006 and January 2008. The LSE held that Minmet had breached AIM Rules 10, 11, 12, 13, 14 and 31 in relation to various transactions in which Minmet had specifically failed to:
- release announcements without delay regarding a reverse takeover, substantial transactions and related party transaction;
- include material information in announcements that it made;
- comply with the requirements for reverse takeovers under the AIM Rules; and
- liaise with its nominated adviser in respect of these matters.
In determining the public sanction, the LSE took into account the number of breaches over a prolonged period of time and the seriousness of those breaches. In the disciplinary notice, the LSE also stressed that the number, nature and duration of the breaches evidenced a clear disregard by the company of the AIM Rules which was reckless. However, the LSE stopped short of imposing a fine on Minmet due to its poor financial situation. This censure may well be the thin end of the wedge as the LSE tries to ensure better disclosure practices by companies and improve their consultation with nominated advisers in the context of the current unpredictable market conditions.
A copy of the Minmet plc disciplinary notice can be found here.
Belgian private investor fined for market abuse
The FSA has fined a Belgian private investor, Mr Erik Boyen, for dealing in the shares of Monterrico Metals Plc, an AIM-quoted company, on the basis of inside information. He was fined a total of £176,254 , which includes a disgorgement of profit of £127,254 and an additional penalty of £49,000.
This fine concludes an FSA investigation into timely dealing in Monterrico shares, during which similar fines were imposed on Erik Boyen's brother, Filip Boyen, and Montericco's former chairman, Richard Ralph.
In January 2007, Richard Ralph asked Filip Boyen to buy shares in Monterrico on his behalf. At the time, it was publicly known that the company was in takeover discussions and that an offer had been made in principal at a premium to the share price. It was also known that Richard Ralph was actively involved in confidential discussions about the takeover. In asking Filip Boyen to buy shares for him he therefore passed on inside information.
Filip Boyen later asked his brother Erik to buy shares on his behalf, and in doing so he too passed on inside information. Erik Boyen knew that the company was in takeover discussions and that Richard Ralph had asked his brother to buy the shares. He was therefore dealing in shares on the basis of inside information when he later bought the shares and sold them on for a personal profit of £127,254. Erik Boyen was also found to have encouraged another person to deal in Monterrico shares.
The FSA Director of Enforcement, Margaret Cole said the fine illustrated the FSA's determination to take action against everyone involved when inside information is used to gain an unfair advantage over other market participants.
A copy of the Boyen disciplinary notice can be found here.