The Financial Conduct Authority bares its teeth

Posted by RM2 at 13:54 on 10 Jan 2020

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At the end of last year, the Financial Conduct Authority ("FCA") imposed a penalty of £45,000 on a senior employee of a listed company for failure to notify his employer and the FCA of dealings in the shares of the company (on 3 separate occasions) under the Market Abuse Regulation (“MAR”). Under the MAR legislation, a relevant trade must be notified to the FCA and the issuer (i.e. the listed company) within 3 days of the relevant transaction having taken place, and the issuer must notify the market. We understand that this is the first enforcement action taken by the FCA in relation to a “failure to notify” – and arguably rather low-hanging fruit in this regard.

It is noteworthy that the miscreant had been notified by the company that it considered him to be a “person discharging managerial responsibilities” (PDMR) and as such fell under the auspices of MAR. He had then gone on (despite being a member of the senior management team and the MD of a subsidiary company (although not a main board member)) to not read any of the documentation sent to him by the company. In addition, he did not obtain prior authorisation from his employer to trade (as required by the employer’s internal policies).

The listed company had share dealing policies and codes in place. The errant trades in question had a total selling price of approximately £61,000 (and related to shares awarded to the relevant individual on their appointment to their current job role). All of the trades were greater that the 5,000 Euros threshold for notification. The FCA also made it clear that ignorance of one’s MAR obligations was no defence.

The penalty had regard to both the seriousness of the breaches (the third trade was very arguably reckless) and the salary of the employee.

RM2 say “bang to rights”!