Business Regulation

FCA publicly censures Redcentric for ‘market abuse’

The FCA has issued a public censure to Redcentric for committing “market abuse” between 9 November 2015 and 7 November 2016 and has revealed that Redcentric has agreed to provide compensation to affected investors.

The FCA said that Redcentric issued unaudited interim results and audited final year results which “materially misstated” its net debt position and overstated its true asset position in circumstances where it knew, or ought to have known that the information was “false and misleading”.

As a result, investors were misled and paid more when purchasing shares than they would have done had they known the true position, the FCA found.

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Mark Steward, executive director of Enforcement and Market Oversight at the FCA, said: “Publicly listed companies must ensure the market is properly informed with timely and true information. In this case, Redcentric issued misleading final year results, harming its own investors and confidence in the market.

“When the company revealed the true position in November 2016, many investors who had purchased Redcentric shares in the preceding 12 months suffered immediate losses. These losses are directly attributable to the misleading statements issued by the company 12 months earlier. Investors deserve to be told the truth and uncomfortable news cannot be hidden for very long.”

He added: “In this case Redcentric has agreed to provide compensation for affected investors to make good the losses while also preserving the company’s ongoing business at a time when the business is providing vitally needed services in the fight against coronavirus (Covid-19). We welcome the Redcentric board’s decision as well as the steps taken to remediate the company’s governance.”

In a separate action, the FCA revealed it has instituted criminal proceedings against three former employees of Redcentric, who are scheduled to appear at Westminster Magistrates court on 28 August 2020. Each individual will face charges of two counts of making a false or misleading statement, contrary to Section 89(1) of the Financial Services Act 2012.

One of the individuals will further face charges of four counts of false accounting, contrary to Section 17(1)(a) of the Theft Act 1968; one count of making a false or misleading statement to an auditor contrary to Section 501 of the Companies Act 2006; and one count of fraud by false representation, contrary to Sections 1 and 2 of the Fraud Act 2006.

Another of those individuals will also face charges of seven counts of making a false or misleading statement to an auditor contrary to Section 501 of the Companies Act 2006; and four counts of false accounting, contrary to Section 17(1)(a) of the Theft Act 1968.

The alleged offending took place between 1st May 2015 and 31st October 2016.

The findings against the firm are separate to the action being taken against the individuals. The FCA added that no assumption should be made that a criminal offence has been committed.

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