At first sight, headlines about a hefty fine meted out by the FSA on a former director of a supermarket chain may have led people to presume that Sir Ken Morrison had incurred the wrath of the Food Standards Agency rather than the Financial Service Authority. The fine serves as a reminder that the long tentacles of the FSA reach every director or major shareholder of every quoted company.

Sir Ken’s fine brings into sharp focus the wide reaching jurisdiction of the FSA which includes, in this instance, the Listing, Prospectus and Disclosure Rules. In its statement on 16 August, passing no judgement on the food sold in his name, the financial regulator said that Sir Ken, who retired in March 2008, had failed to disclose the sale of a significant portion of his 6.4% shareholding which left him with just 0.9%. Sir Ken did not make any financial benefit from his failure to disclose but it did prevent the FSA from updating the market in accordance with Disclosure and Transparency Rules (DTR). The FSA was not informed of the share sale until March 2011.

In general terms, if the voting rights of a person exceed or fall below certain levels, that person has an obligation to notify the issuer, subject to certain exceptions. The sale or purchase must be reported to the company no later than two trading days following the trade and then the company must make this information public by the end of the following trading day.

Tracey McDermott, acting FSA Director of Enforcement and Financial Crime said:

“It is important that significant shareholders recognise that timely disclosure of their shareholdings and voting rights is a fundamental component of a properly informed securities market. Investors are entitled to know when major and influential shareholders significantly reduce their interest in a listed company” (emphasis added).

All Directors, shareholders and their advisors must, in respect of listed companies, keep the DTR at the forefront of their minds or else, regardless of the sector they operate in, they will face the full force of the FSA.