Jessica Fino 15 Dec 2017 01:47pm

FCA fines AIM company for late disclosure

The Financial Conduct Authority (FCA) has issued the first fine on an AIM company for late disclosure

Tejoori, an investment company, was fined £70,000 for failing to inform the market of inside information. It follows the introduction of the Market Abuse Regulation (MAR) in July last year.

The company, which traded shares from 2006 until December 2017 and has now cancelled its admission to trading on AIM, had two major investments last year –one of them being a shareholding in BEKON valued at $3.35m.

In July 2016, the company was notified by BEKON about a compulsory acquisition of its shares by manufacturers the Eggermann Gruppe, the FCA said, which required Tejoori to sign a share purchase agreement and to sell its BEKON shares to Eggersmann.

However, Tejoori failed to disclose the information “as soon as possible” despite this being inside information under MAR.

Moreover, Tejoori’s BEKON shares were transferred to Eggersmann in August, but both companies failed to disclosure that it did not receive money for the shares in their press releases about the deal.

As a result, the market speculated about the money that may have been paid to the company and its share price rose by 38% over two days.

The London Stock Exchange contacted the company’s nominated adviser about the sudden rise in price but the adviser was not aware of the deal and therefore said there was no inside information or shares sale. The adviser later obtained clarification from Tejoori’s German legal adviser.

Tejoori released an announcement in August 2016 confirming that it had sold its BEKON shares for no initial consideration and that it was unable to assess whether it would receive any future payment. Tejoori’s share price closed 13% down on that day as a result.

Mark Steward, FCA executive director of enforcement and market oversight, said, “Tejoori’s failure to promptly disclose inside information misled the market in Tejoori’s shares and prevented investors from making fully informed investment decisions.

“This was a serious breach. Issuers must have regard to their disclosure obligations at all times and misunderstanding the commercial reality of a transaction is no excuse.”

Tejoori is cooperating with the investigation and agreed to settle at an early stage, therefore is qualified for a 30% discount. Without the discount, the penalty would have been £100,000.