The FSA has issued the final notice in connection with its decision to fine JJB Sports PLC for breach of DTR 2.2 and Listing Principle 4. The fine of £455,000 (£650,000 before application of an early settlement discount) is the second largest fine imposed by the FSA on a company for breach of the Listing and Disclosure & Transparency Rules.
The breaches stem from JJB's failure to disclose full details of the consideration payable under two acquisitions it announced in December 2007 and May 2008. The RIS announcements by the company in relation to the acquisitions contained details of the principal consideration payable (i.e. £5 million and £1 respectively) but they did not mention further uncapped liabilities to pay for the stock in the 2007 acquisition (£10 million) and settle the overdraft in the 2008 acquisition (£6.4 million). These details were only announced to the market in the company's half-yearly results announcement on 26 September 2008. On the day those half-yearly results (which also contained other negative news and a going concern emphasis of matter) were released, JJB's share price fell by approximately 49.5%.
Under DTR 2.2 a listed company must notify an RIS as soon as possible of any inside information (as defined in section 118C of the Financial Services and Markets Act 2000) which directly concerns the issuer. Listing Principle 4 requires premium listed companies to communicate information to holders and potential holders of its listed equity securities in such a way as to avoid the creation or continuation of a false market in those equity securities.
The FSA concluded that the true costs of both of the acquisitions (including the liability to pay for the stock and the liability to settle the overdraft) amounted to inside information in relation to JJB's shares. The delay in disclosing the additional liabilities payable under the acquisitions meant that the company was found to have failed to disclose inside information, in a breach of DTR 2.2. The failure to disclose these additional liabilities also meant that JJB was found to be in breach of Listing Principle 4.
The FSA's final notice in relation to JJB is available on the FSA website.