Shares in Quindell have today been suspended from the AIM market and an investigation into “public statements made regarding the financial accounts of the Company” has been initiated by the Financial Conduct Authority, according to this announcement.
ShareSoc applauds the launch of this investigation, with the FCA acting too rarely on the many cases of questionable statements made by AIM quoted companies in particular.
Comments have previously been made questioning the veracity and motivations of statements made by those short of certain companies’ shares. I’m sure we all agree that statements designed to mislead and affect share prices should be prosecuted with the full force of the law, according to the Market Abuse regime, irrespective of whether they come from the short or the long side. Nevertheless, it is my own personal experience that it is (sadly) more frequent for misleading statements to emanate from companies themselves, than from attackers. Quite frequently it is only from investigations conducted by parties with a short interest in a stock that management misdemeanours are uncovered. What is the point in shorting a stock, unless there are reasons to doubt the valuation being ascribed to it by the market?
ShareSoc will continue to press the FCA to investigate and prosecute cases of Market Abuse. Shareholders have lost large sums of money through believing that statements made in RNSs can be relied on and are not designed to mislead.. It is time that the FCA ensured that investors can rely on such official statements, by prosecuting offenders vigorously and publicly. Moreover, it is essential that such prosecutions should focus on offending directors, and not on the companies. When companies suffer a financial penalty as a result of misleading statements made by directors, it adds insult to shareholders’ injury by penalising the innocent shareholders, as opposed to those responsible. Justice must be seen to be done.
The views expressed in this article are those of the author and not necessarily those of ShareSoc.