.jpg)
The Financial Services Authority (FSA) today fined Photo-Me International plc (Photo-Me) £500,000 for failing to disclose inside information to the market as soon as possible. The delay led to a false market in Photo-Me’s shares for 44 days.
Photo-Me’s principal activities include the manufacture and sale of photo-processing equipment such as ‘minilabs’.
In September, November and December 2006, Photo-Me made announcements that created an expectation in the market that it would benefit from the winning of large minilab sales contracts and strong minilab sales generally. These announcements were a key factor underpinning Photo-Me’s share price in the relevant period and were based, in part, on Photo-Me’s expectation that it would conclude a contract with a large US-based retailer (the Albertsons contract) for the sale of 200 minilabs. Photo-Me recognised that in order to meet the market expectations it had created it needed to sell around 1,100 minilabs between November 2006 and April 2007.
On 17 January 2007 Photo-Me was informed that it was no longer engaged in exclusive negotiations for the Albertsons contract but rather that the contract was being re-tendered and Photo-Me was one of at least five competitors for the business. This was inside information and should have been disclosed as soon as possible.
By 12 February 2007 Photo-Me had information that its January 2007 minilab sales had been 40% behind budget and that revised forecasts were predicting sales of only around 750 minilabs. This was also inside information and should have been disclosed as soon as possible.
Despite having been warned by its auditors that the minilab sales target was challenging and needed close monitoring, it was not until Photo-Me’s next scheduled quarterly board meeting on 1 March 2007 that it considered the effect of the inside information, after which a profit warning was issued on 2 March 2007. Photo-Me’s share price closed 24% lower that day.
Margaret Cole, director of enforcement and financial crime at the FSA, said:
"This is the largest fine of its type issued by the FSA and demonstrates our commitment to enforcing the UK Listing regime and ensuring clean, efficient and orderly markets.
"Listed companies should assess, in a timely fashion, how any information they hold affects the accuracy of what they have previously disclosed to the market and whether this information is inside information. Inside information must be announced to the market as soon as possible to allow investors the opportunity to make informed investment decisions.”
The FSA has made no findings of regulatory breach against any past or present directors of Photo-Me in relation to this matter.
