FSA Fines Woolworths Over Disclosure Failure

by Robert Lee, Tax-News.com, London

12 June 2008

The UK's Financial Services Authority (FSA) announced on Thursday that it has fined high street retailer Woolworths Group plc GBP350,000 for failing to disclose information to the market in a timely manner.

The FSA explained that on 20th December 2005, Woolworths became aware of a variation to the terms of a major supply contract of one of its subsidiaries, Entertainment UK (EUK).

The effect of the variation was to reduce Woolworths' profits for the year 2006/07 by an estimated GBP8mn.

This was inside information as it was likely to have a significant effect on Woolworths' share price, and should therefore have been disclosed to the market as soon as possible.

Woolworths' failure to identify inside information and subsequently disclose this information until its scheduled Christmas trading update on 18th January 2006 created a false market in its shares which breached Disclosure Rule 2.2.1 and Listing Principle 4.

Margaret Cole, Director of Enforcement, commented that:

"Clean, efficient and orderly markets depend on timely and proper disclosure of relevant information. Woolworths' failure to disclose vital information led to a false market in its shares for 29 days. This sort of failure is unacceptable."

She continued: "Investors deserve, and the FSA expects, higher standards than Woolworths showed. We will not hesitate to take action where listed companies fail to meet obligations imposed by the Rules and Principles."

The Disclosure Rules, (now known as the Disclosure and Transparency Rules), and Listing Principles provide a fundamental protection for shareholders by requiring full disclosure to the market of all relevant information on a timely basis.

This ensures that all users of the market get the same information at the same time.

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