The Financial Services Authority (FSA) has published a final notice setting out its decision to fine Lamprell plc (Lamprell) £2,428,300 for significant failings in its systems and controls which resulted in breaches of the Listing Principles, the Disclosure and Transparency Rules (LDTR) and of the Model Code on directors’ dealings in securities.
This is the first penalty against an issuer for a breach of the LDTRs, involving delayed release of inside information, to be imposed pursuant to the FSA’s new (March 2010) penalty policy.
The regulator expects its new approach – which uses a percentage of the issuer’s market capitalisation to calculate the penalty for LDTR breaches involving inside information – will yield significantly higher penalties going forward – larger listed companies, in particular, could face very substantial penalties, akin to US penalty levels.
To read a more detailed note of the case, click here.
Lessons to be learned
In light of this case, listed companies should ensure that:
- they review their procedures for the flow of management and financial information, with particular focus on reporting systems;
- their systems and procedures keep pace with the company’s expansion;
- when acquiring another company, the company should pre-plan the integration, with a particular focus on reporting systems;
- if necessary they should engage extra staff to make sure that the company is able to monitor its financial performance; and
- when asking for verification of unexpected results which are out of line with market expectations, issuers should consider whether a holding announcement should be made.
This enforcement action, together with the recent fines imposed on Nestor Healthcare Group Limited (for clearance to deal failings) and against Exillon Limited (for failing to identify and disclose related party transactions), serve as a clear warning to listed companies that the new FCA will continue to focus on and enforce compliance with the LDTRs.