FSA fines firm £500,000 for not disclosing inside information
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The FSA today fined Photo-Me International £500,000 for failing to disclose inside information to the market as soon as possible.
The delay led to a false market in Photo-Me’s shares for 44 days.
Photo-Me’s principal activities include the manufacture and sale of photo-processing equipment such as minilabs.
In September, November and December 2006, Photo-Me made announcements that created an expectation in the market that it would benefit from the winning of large minilab sales contracts and strong minilab sales generally.
These announcements were a key factor underpinning Photo-Me’s share price in the relevant period and were based, in part, on Photo-Me’s expectation that it would conclude a contract with a large US-based retailer, Albertsons, for the sale of 200 minilabs.
Photo-Me recognised that in order to meet the market expectations it had created it needed to sell around 1,100 minilabs between November 2006 and April 2007.
On January 17, 2007 Photo-Me was informed that it was no longer engaged in exclusive negotiations for the Albertsons contract but rather that the contract was being re-tendered and Photo-Me was one of at least five competitors for the business.
The FSA says this was inside information and should have been disclosed as soon as possible.
By February 12, 2007 Photo-Me had information that its January 2007 minilab sales had been 40 per cent behind budget and that revised forecasts were predicting sales of only around 750 minilabs. The FSA says this was also inside information and should have been disclosed as soon as possible.
Despite having been warned by its auditors that the minilab sales target was challenging and needed close monitoring, it was not until Photo-Me’s next scheduled quarterly board meeting on March 1, 2007 that it considered the effect of the inside information, after which a profit warning was issued on March 2, 2007. Photo-Me’s share price closed 24 per cent lower that day.
The FSA made no findings of regulatory breach against any past or present directors of Photo-Me over this matter.
FSA director of enforcement and financial crime Margaret Cole says: “This is the largest fine of its type issued by the FSA and demonstrates our commitment to enforcing the UK Listing regime and ensuring clean, efficient and orderly markets.
“Listed companies should assess, in a timely fashion, how any information they hold affects the accuracy of what they have previously disclosed to the market and whether this information is inside information. Inside information must be announced to the market as soon as possible to allow investors the opportunity to make informed investment decisions.”
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