The FSA says on December 20, 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.
The FSA adds Woolworths’ failure to identify and disclose this information until its scheduled Christmas trading update on January 18, 2006 created a false market in its shares and breached Disclosure Rule 2.2.1 and Listing Principle 4.
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.”