The accidental purchase of nearly 4,000 shares in Frasers Group might win its chairman an investigation by the Financial Conduct Authority, but the regulator is unlikely to go in with “all guns blazing”, a financial crime expert has said.
On Tuesday Frasers, Mike Ashley’s retail empire, said that chairman David Daly had bought around £11,000 worth of shares “in error” just days before the company is set to present its annual results.
People who are likely to have access to information from inside a company are banned from trading in its shares 30 days before it releases any financial results – this is the so-called close period.
David Savage, a partner at law firm Stewarts, said that accidentally buying a company’s shares during the close period is unusual
“I haven’t heard of it happening before,” he told the PA news agency. “That’s not to say that it doesn’t happen.”
Frasers said that Daly sold the shares in his company just 15 minutes after buying them, as soon as the company noticed. The approximately £150 profit he made from the sale has been donated to charity.
“I think what we’ve got here is a clear situation of a system and control failure,” said Savage.
He added: “What’s happened from what I can see is that there wasn’t a red flag that prevented the issuance from the beginning, the buying of shares and the selling of shares in that close period.
“After that something triggered an alarm bell and the situation was rectified very promptly. So it’s not a complete system and controls failure.
“Whether the FCA thinks that is sufficient to not warrant a minor investigation into this, I don’t know.”
He went on: “They may be inclined to do it just because it’s a big name and it’s an obvious breach of the market abuse regulations. But they may also decide that because it was so promptly picked up that it is an internal matter.
“Is it significant enough for the FCA to give a fine? I’m not sure it is… I’d be surprised if the FCA were to go all guns blazing.”
In a statement revealing the error, Frasers said it had “robust procedures in place before PDMRs [persons discharging managerial responsibilities] can trade in shares which were accidentally not followed in this instance.”
The regulator rarely comments on ongoing investigations and it did not have an immediate answer when asked if it had been told about Daly’s mis-step, and if it would investigate.
Frasers reveals its full year results tomorrow.