The FSA says on 20 December 2005, Woolworths became aware of a variation to the terms of a major supply contract of one of its subsidiaries, Entertainment UK.
The variation reduced Woolworths’ profits for the year 2006/07 by an estimated £8m. The regulator says this was inside information as it was likely to have a significant effect on Woolworths’ share price and should therefore have been disclosed to the market as soon as possible.
Woolworths’ failure to identify inside information and subsequently disclose this information until its scheduled Christmas trading update on 18 January 2006 created a false market in its shares which breached Disclosure Rule 2.2.1 and Listing Principle 4.
In the last four years, the FSA has taken action against Eurodis Electron, MyTravel Group, Pace Micro Technology, Universal Salvage and Martin Christopher Hynes, Sportsworld Media Group and Geoffrey Brown for similar listing rules breaches.
FSA director of enforcement Margaret Cole says: “Clean, efficient and orderly markets depend on timely and proper disclosure of relevant information. Woolworths’ failure to disclose vital information led to a false market in its shares for 29 days. This sort of failure is unacceptable.
“Investors deserve, and the FSA expects, higher standards than Woolworths showed. We will not hesitate to take action where listed companies fail to meet obligations imposed by the Rules and Principles.”