‘Reckless’ Carillion directors to escape financial penalty from FCA

In a Warning Notice Statement issued today, the FCA revealed that Carillion and certain of its former executive directors were given a warning notice each in September.

The FCA found that, during the period from 1 July 2016 to 10 July 2017, the relevant executive directors were knowingly concerned in the following breaches by Carillion:

• Article 15 of MAR (prohibition of market manipulation) by disseminating information that gave false or misleading signals as to the value of its shares in circumstances where it ought to have known that the information was false or misleading;
• Listing Rule 1.3.3R (misleading information must not be published) by failing to take reasonable care to ensure that its announcements were not misleading, false or deceptive and did not omit anything likely to affect the import of the information;
• Listing Principle 1 (procedures, systems and controls) by failing to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations under the Listing Rules;
• Premium Listing Principle 2 (acting with integrity) by failing to act with integrity towards its holders and potential holders of its premium listed shares.

The FCA also found that Carillion and the relevant executive directors acted recklessly in relation to the following matters:

• Carillion’s announcements on 7 December 2016, 1 March 2017 and 3 May 2017 were misleading and did not accurately or fully disclose the true financial performance of Carillion. They made misleadingly positive statements about Carillion’s financial performance generally and in relation to its UK construction business in particular, which did not reflect significant deteriorations in the expected financial performance of that business and the increasing financial risks associated with it.
• Carillion’s systems, procedures and controls were not sufficiently robust to ensure that contract accounting judgments made in its UK construction business were appropriately made, recorded and reported internally to the Board and the Audit Committee.
• At material times, the relevant executive directors were each aware of the deteriorating expected financial performance within the UK construction business and the increasing financial risks associated with it. They failed to ensure that those Carillion announcements for which they were responsible accurately and fully reflected these matters. Despite their awareness of these deteriorations and increasing risks, they also failed to make the Board and the Audit Committee aware of them, resulting in a lack of proper oversight.