Lawyers warn that companies failing to comply with the regulator’s disclosure regime will incur tough penalties.
In its concerns over the rising number of profit warnings, the Financial Services Authority is probing large companies over possible failure to disclose key trading data to the markets. But lawyers say the watchdog’s focus on disclosure could lead to disputes with companies over what information should have been revealed and when, especially given the wider circumstances surrounding many decisions during the credit crisis. The FSA’s probes could lead to fines for companies that break the listing rules and criminal prosecution of executives for “market abuse”.
The FSA has always scrutinised sharp share price movements after profits warnings the regulator carries out more than 200 “enquiries” a year (although many are routine checks). But the credit crunch is seeing a higher volume of cases than normal and a larger number involving multinationals that would not normally expect trading difficulties.
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