FSA Fines Sir Morrison for Disclosure and Transparency Rules Breach
The Financial Services Authority (FSA) has fined Sir Ken Morrison £210,000 for breaching the Disclosure and Transparency Rules (DTR) when he failed to disclose his reduced shareholding and voting rights in Wm Morrison Supermarkets Plc.
The fine is the second in FSA’s action against individuals this week, the first being imposed on Michiel Weiger Visser and Oluwole Modupe Fagbul who breached Principle 1 of the FSA’s Statements of Principle for Approved Persons, costing them £2 million and £100,000, respectively.
The FSA said Wm Morrison announced on March 28, 2008 that Sir Ken had a notifiable holding of voting rights of 6.38 (a holding worth over £450 million) percent shortly after his retirement as chairperson of the company.
According to the FSA, between 2009 and 2010 Sir Ken’s shareholding had been cut “substantially,” which reduced his voting rights to 0.9 percent. Sir Ken allegedly failed to notify Wm Morrison on four separate occasions when his voting rights fell below 6 percent, 5 percent, 4 percent and 3 percent.
The Disclosure and Transparency Rules set out in the FSA Handbook state that “a person must notify the issuer of the percentage of its voting rights he holds as shareholder or holds or is deemed to hold through his direct or indirect holding of financial instruments” subject to the exemption for certain third country issuers.
In addition, the rules provide that the notification to the issuer must take effect as soon as possible, “but not later than four trading days in the case of a non-UK issuer and two trading days in all other cases, the first of which shall be the day after the date on which the relevant person learns of the acquisition or disposal or of the possibility of exercising voting rights.”
Although Sir Ken did not financially benefit from these breaches, the FSA claimed that his failure to notify Wm Morrison of the changes to his shareholding removed Wm Morrison’s position to update the market in accordance with the DTR rules.
“This resulted in the market being misled as to the ownership of voting rights in WM Morrison and Sir Ken’s shareholding being stated incorrectly in Wm Morrison’s annual report of 31 January 2010,” the FSA said.
Tracey McDermott, acting director of enforcement and financial crime, said: “It is important that significant shareholders recognise that timely and accurate disclosure of their shareholdings and voting rights is a fundamental component of a properly informed securities market. Investors are entitled to know when major and influential shareholders significantly reduce their interest in a listed company. Sir Ken should have been aware of his obligations and his failure to meet them has resulted in this fine.
“The rules are designed to enhance transparency and provide investors with timely information regarding voting rights in issuers. Failure to comply with the rules risks damaging investor confidence in the financial markets.”