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The financial watchdog is proposing to take action after it warned Carillion and certain directors that they had acted “recklessly” and made misleading statements about the value of the business.
The Financial Conduct Authority (FCA) said on Friday (13 November) that it had given warning notices to Carillion (in liquidation since 15 January 2018) and to certain previous executive directors.
In relation to Carillion, the FCA is proposing a public
censure rather than a financial penalty.
The FCA said that during the period from 1 July 2016 to 10
July 2017, Carillion breached rules on market manipulation by giving “false or
misleading” signals as to the value of its shares, as well as “failing to take
reasonable care to ensure that its announcements were not misleading”.
Carillion was also accused of “failing to take reasonable
steps to establish and maintain adequate procedures, systems and controls” to
enable it to comply with listing rules, and of “failing to act with integrity towards
its holders and potential holders of its premium-listed shares”.
The FCA said that relevant directors were “knowingly
concerned” in the breaches.
It said: “Carillion’s announcement on 7 December 2016, 1
March 2017 and 3 May 2017 were misleading and did not accurately or fully
disclose the true financial performance of Carillion. They made misleadingly
positive statements about Carillion’s financial performance of that business
and the increasing financial risks associated with it.
“Carillion’s systems, procedures and controls were not
sufficiently robust to ensure that contract accounting judgements made in its
UK construction business were appropriately made, recorded and reported
internally to the board and the audit committee.
“At material times, the relevant executive directors were
each aware of the deteriorating expected financial performance within the UK construction
business and the increasing financial risks associated with it. They failed to ensure
that those Carillion announcements for which they were responsible accurately
and fully reflected these matters. Despite their awareness of these deteriorations
and increasing risks, they also failed to make the board and the audit
committee aware of them, resulting in a lack of proper oversight.”
The FCA also stressed that the warning notices do not
represent a final decision, and that the firm and individuals have the right to
make representations to the Regulatory Decisions Committee (RDC).