The Financial Conduct Authority today (June 26) issued a public censure to Redcentric for committing market abuse between November 2015 and November 2016.
Redcentric had reported unaudited interim results and audited final year results which “materially misstated” its net debt position and overstated its true asset position in circumstances where the firm knew, or ought to have known, such figures were false, the FCA stated.
As a result, investors were misled and paid more when buying shares than they would have done had they known the true position, the regulator found.
Redcentric has agreed to offer compensation to affected investors who purchased shares from November 2015 to November 2016, estimating the value of the compensation scheme at £11.4m.
The FCA estimates the losses to affected shareholders to be approximately £43m.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Publicly listed companies must ensure the market is properly informed with timely and true information. Redcentric issued misleading final year results, harming its own investors and confidence in the market.
“When the company revealed the true position in November 2016, many investors who had purchased Redcentric shares in the preceding 12 months suffered immediate losses.”
Mr Steward added investors deserved to be told the truth and that the “uncomfortable news” could not be hidden for very long.
This was the first time an AIM-listed company had offered to implement its own scheme to pay some compensation to those affected by the harm it had caused as a result of market abuse.
Due to this action, the FCA decided to impose a public censure — a public telling off — rather than a financial penalty.
It had also taken into account the potential negative impact of a fine on Redcentric’s business, investors and customers. Redcentric’s customers, which include the NHS, were providing a “vital service” combatting the coronavirus pandemic, the FCA said.
In a separate action, three former employees of Redcentric will also face criminal proceedings, with each individual facing charges of two counts of making false or misleading statements.
One of the employees will face a further four counts of false accounting, one count of making a false or misleading statement to an auditor and one count of fraud by false representation.
Another will face further charges of seven counts of making a false or misleading statement to an auditor and four counts of false accounting.
The three employees are scheduled to appear at Westminster Magistrates on August 28 this year.