Lombard 1 Oct 2019 suggested ShareSoc may sue the Thomas Cook auditors. ShareSoc is always pleased to get a mention in the FT. However, the FT were a bit naughty as they were quoting me from a story of some days ago in the Daily Mail, see https://www.sharesoc.org/media-mention/daily-mail-24-september-2019-thomas-cook-small-investors-fury/ . The FT also did not check with me to see if that was still our position.
So I am writing this blog to clarify. Our issue was principally about the gleeful optimism of management’s updates. Regarding suing we have now had time to consider and we are now not looking to see if EY can be sued by shareholders and ShareSoc itself is most certainly not planning to sue EY, because:
- The “no look through” principle means that individual investors holding shares via platforms/nominees can only seek redress from the platform with whom they are contracted. The Law Commission Review of Intermediated Securities has highlighted this issue and is looking for ways to correct it.
- The Caparo judgement makes it difficult for shareholders to sue auditors. We believe Caparo needs to be reversed by legislation.
- There is no Duty of Care from auditors to shareholders. There should be.
- The EY report in May 2019 did state there was “Material uncertainty related to going concern”. However, many individual investors would not have seen this report. This is not EY’s fault, but another failure in the way the nominee system works.
What we shall be doing is responding to the Law Commission Consultation on Intermediated Securities highlighting points 1 and 4 and making recommendations on how to improve these matters; and lobbying Government, BEIS, FRC, Brydon, the CMA and FCA about Auditors Duty of Care, Caparo and other problems in the way audits and auditors operate.
Cliff Weight, Director, ShareSoc