The Financial Conduct Authority has publicly censured insurer Aviva for making an announcement that had the potential to mislead the market.
The insurer made the announcement on 8 March 2018. It concerned Aviva’s preliminary year-end results. The trouble was that the announcement was reasonably capable of giving the impression that Aviva intended to take action to cancel at par value certain preference shares, which had been described at the time of issue in the early 1990s as “irredeemable.”
This is what the FCA’s investigation into breaches of the Listing Rules and Transparency Rules found to be problematic as, at the time, the preference shares were trading above their par value and so the statement caused concern that holders would incur losses on cancellation.
At the close of market on that day the market price for Aviva’s preference shares fell between 20% and 26% as holders took action to sell at the above par market price. Retail investors made up a significant proportion of the preference shareholders affected.
Aviva clarified the statement and provided a payment scheme for those shareholders affected. The FCA has found Aviva’s breach to be serious but not intentional.
Aviva made the Announcement when it had, in fact, formed no intention to cancel the preference shares in question, according to the FCA. The impression given by the Announcement was not accurate. Aviva clarified its intentions in a further regulatory announcement on 23 March 2018 which expressly stated Aviva had decided to take no action to cancel the preference shares.
“This was a significant oversight by Aviva that confused the market for preference shares,” said Mark Steward, executive director of enforcement and market oversight at the FCA. “Firms must ensure that announcements to the market are clear and not misleading. But for Aviva’s prompt clarification and the payment scheme, this case could have led to a financial penalty.”
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