Regulations and Law

Good News – Autonomy CFO Jailed

Good news – former CFO of public company jailed for fiddling the accounts. Oh to see that happen more often so as to deter manipulation of accounts that is so prevalent and so damaging to investors. Sushovan Hussain, the former CFO of software company Autonomy, was sentenced to 5 years imprisonment by a US Court yesterday plus he was fined $4 million and ordered to forfeit $6.1 million he made from the sale of the company to Hewlett-Packard. He won’t even be ...

Changes Proposed at Companies House

The Government BEIS Department have recently proposed a number of important changes to the way Companies House operates in a public consultation entitled “Corporate Transparency and Register Reform” (see https://tinyurl.com/yysf9gdn ). Here’s a brief summary of the main points: This consultation will be of interest to anyone who is a director of a private or a public company, or a major shareholder in such a company (i.e. those People with Significant Control). Even directors of the smallest companies could be affected. A major ...

Warren Buffett and FCA Review of RDR & FAMR

There was an interesting article on the career of Warren Buffett in the last FT Weekend magazine. It was a wide-ranging interview with the renowned investor who became one of the richest persons in the world by making investments which consistently outperformed the markets over the last 50 years. At age 88 he still claims to be having fun by working at investment. But in the last ten years he has fallen behind the S&P index. The reason is primarily because he ...

Audit Market Shake-Up, Ocado on TV, and Judges Scientific Presentation

The Competition and Markets Authority (CMA) have issued their final recommendations to improve competition in the audit market after an earlier public consultation. This follows widespread concerns over the dominance of the big four audit firms, the lack of apparent competition on price or quality, and repeated complaints about the quality of audits following several big and small company failures. Audit firms seem to have got off relatively lightly if the CMA’s recommendations are implemented by the Government. Here’s a brief ...

Debenhams PrePack, Dunelm Trading, ASOS and Privacy

Department store operator Debenhams (DEB) has been put through a pre-pack administration. It’s been bought by a new company formed by its secured lenders. Mike Ashley of Sports Direct is furious. His company invested £150 million in the shares of the company in the hope of taking it over, which will now be worthless. He had some choice words to say on the subject which included that it was an “underhand plan to steal from shareholders”, “as normal politicians and regulators ...

FCA Makes Platform Switching Easier

The Financial Conduct Authority (FCA) have today announced some measures to improve competition in the platforms market. Experienced investors who use electronic trading platforms will be well aware of the problems of switching to another provider if they are dissatisfied with the service, wish to move to a cheaper provider or for other reasons such as consolidating on one provider or spreading their risk over several. It simply takes too long to move “in-specie” holdings from one platform to another  ̶  ...

FRC Revolution to Fix Audit and Accounting Problems

A major announcement that will impact investors was made yesterday by the Government. You may not have noticed it in the midst of political turmoil, but it’s worth studying. The Kingman review of the Financial Reporting Council (FRC) was published last December. It was a quite damning criticism of many aspects of the current regulatory regime that had resulted in so many audit failures and poor-quality financial reporting. See my previous blog post on this subject here: https://roliscon.blog/2018/12/18/all-change-in-the-audit-world/ There are few experienced investors ...

Metro Bank, Improving Accounts, Patisserie, Telford Homes and GoCompare

Originally posted 28th February 2019 The latest example of a public company publishing misleading accounts is Metro Bank (MTRO). Both the FCA and PRA (the bank regulator) are looking into the “misclassification” of some loans which resulted in the bank overstating its regulatory capital. The result was that it has had to do an equity share issuance to bolster its capital. There was a very good letter to the FT today on the subject of improving accounting and audits from Tim Sutton. He ...

The Unstoppable Glacier of Government’s Concerted Actions?

By Cliff Weight, Director, ShareSoc We sometimes see things changing at a glacier-like pace. But once a glacier starts moving it has huge momentum and is unstoppable. My question is: is this metaphor applicable to the way Government is behaving with regard to business? The civil servants who drive Government policy transcend the short lives of Parliament. Taking this perspective what do we see? My take on this is as follows. The Financial Crisis terrified nearly everyone. We stared into the abyss. We were ...

Inconvenient AGM at Phoenix, Changes to “Going Concern” and GoCompare

I have been advised that life insurance and pension consolidator Phoenix Group (PHNX), a FTSE 250 company, is holding this year’s AGM in Edinburgh at 9.00 am. That’s a damn inconvenient time and location for most investors. Previous general meetings have been held in London where their registered office is located, although I am told that only one director and no shareholders turned up for the 2018 AGM. This is the explanation given by the company for the latest venue in the ...