Former Chairman of Morrisons “was not aware” of requirement to inform the market of share sales
The Financial Services Authority announced on 16 August 2011 that it has fined Sir Ken Morrison £210,000 for breaching the Disclosure and Transparency Rules (DTRs) by failing to disclose his reduced shareholding and voting rights in Wm Morrison Supermarkets Plc (Morrisons). The FSA press release is here and its Final Notice is here.
Sir Ken sold down shares in Morrisons in a number of transactions in 2009 and 2010, taking his holding from over 6% to under 1%. DTR 5.1.2R requires that a person must notify the issuer of the percentage of its voting rights he holds if the percentage of those voting rights reaches, exceeds or falls below 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter. DTR 5.8.3(1)R requires that the notification to the issuer should be made as soon as possible, but – in the case of a UK issuer – no later than two trading days after the acquisition or disposal.
Sir Ken made no shareholder notification in regard of his 2009 and 2010 share sales until 1 March 2011. In the words of the FSA Final Notice, Sir Ken’s explanation for the “failure to notify in good time is that he was not aware of the requirement to do so”. The Final Notice continues that:
“Whilst a man in Sir Ken’s position should have been aware of his obligations and might have been expected to take legal advice when selling his shares there is no evidence to suggest that he was reckless in this regard or that his conduct was deliberate.”
Although the FSA observes that:
“Sir Ken is an extremely wealthy individual who held a prominent position within his industry. Person’s [sic] breaching DTR 5.8.3R are likely to be comparably wealthy and/or institutional investors. There is a clear need to impose a meaningful penalty to achieve deterrence.”
Accordingly the FSA fined Sir Ken £300,000, reduced to £210,000 because he settled at an early stage. Sir Ken’s holding at the start of the relevant share sales was worth over £450 million. Given the size of the sums raised from the share sales, it seems curious that the broker through whom the sales were presumably effected did not mention the disclosure obligations to Sir Ken.
Friendly Corporate PSL
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