On 13 November 2020, the Financial Conduct Authority (FCA) published its summary of the reasons why earlier this year it gave a warning notice to each of Carillion plc and certain individuals who were executive directors of the company at the relevant time. 

Who should read the statement?

All those responsible for ensuring that a listed company complies with its obligations under the listing rules would be well advised to read the short statement released by the FCA. 

What did the FCA say?

The FCA highlighted three specific concerns:

  • the accuracy of certain RNS announcements issued by Carillion;
  • whether Carillion had taken reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations under the listing rules and disclosure requirements under EU MAR; and
  • the importance of executive directors sharing adverse and deteriorating financial information with the board and the audit committee.

In the FCA's view:

  • a number of RNS announcements issued by the company were misleading and did not accurately or fully disclose the true financial performance of Carillion;
  • 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; and
  • at material times, the relevant executive directors were each aware of the deteriorating financial performance within the UK construction business and the increasing financial risks associated with it. However "they failed to ensure that those Carillion announcements for which they were responsible accurately and fully reflected these matters."

The FCA noted that it considered that during the period from 1 July 2016 to 10 July 2017 the company breached Article 15 of EU Mar, LR 1.3.3R, Listing Principle 1 and Premium Listing Principle 2. The FCA considers that the relevant executive directors were knowingly concerned in the breaches by Carillion. Interestingly, LR 1.3.3R (Misleading information not to be published) also featured in the recent censure of Aviva plc and this latest enforcement action serves as a reminder of the importance of that rule.

The full FCA statement is available at; https://www.fca.org.uk/publication/warning-notices/warning-notice-statement-20-2.pdf

Will Carillion be subject to a financial penalty? No. The FCA has, for obvious reasons given that the company is in liquidation, indicated that a public censure is proposed in relation to Carillion. 

What happens next? A warning notice is not a final decision and those involved have the right to make representations to the Regulatory Decisions Committee. So further news can be expected depending on the outcome of the regulatory process.