27th Jan 2005 07:00
Financial Services Authority27 January 2005 FSA/PN/010/2005 For immediate release 27 January 2005 Pace Micro Technology fined £450,000 for Listing Rule breaches The Financial Services Authority (FSA) has today fined Pace Micro Technology plc(Pace) £450,000 for breaches of the Listing Rules in January and February 2002. The FSA has found that Pace breached the Listing Rules because it failed toensure its Interim Results Announcement on 8 January 2002 included all relevantinformation, when it did not reveal that its trade credit insurance, in respectof one of its largest customers, had been withdrawn. It also failed to updatethe market without delay of a change in its expectation as to its future revenueperformance which had occurred on 4 February 2002. When Pace did alert themarket as to its financial position on 5 March 2002, its share price fell 67% byclose of trading. Gay Huey Evans, Director of Markets at the FSA, said: "The effect of Pace's omission from its Interim Announcement on 8 January 2002was further compounded by the delay in announcing its changed expectation as toits financial performance until 5 March 2002. These were clear breaches of theListing Rules. "The FSA requires listed companies to ensure the financial information theyrelease to the market is accurate and provided without delay to enable investorsto make informed investment decisions. This is a fundamental protection forshareholders and is vital for the smooth operation of efficient, orderly andcompetitive markets. "This is the third time in the last 12 months that the FSA has taken actionagainst a company for failing to observe the Listing Rules. It demonstrates howseriously we view a failure by companies to meet expected standards and ourdetermination to take action for such failures." Background Pace is involved in the manufacture, development and distribution of digitaltelevision set top boxes. Pace's primary customer base, during this period, wascomposed of a small number of large European and US companies. One of itslargest customers in late 2001 was NTL Group Limited (NTL), a subsidiary of theUS-based NTL Inc which was suffering well publicised financial difficulties. NTL, during the first half of Pace's financial year 2001/2002, accounted for 42%of Pace's turnover by volume and 48% by revenue. Pace had made known to themarket, in previous Annual Reports, that it maintained a policy of trade creditinsurance in respect of its larger customers. Interim Results Announcement of 8 January 2002 In October 2001, NTL placed orders for 450,000 set top boxes, to be delivered inJanuary, February and March 2002, on which Pace's forecasted revenues for thefinancial year ending 1 June 2002 were dependent. In early December 2001, thesize of the order was reduced to 300,000 boxes and the parties continued todiscuss payment and delivery terms. On 19 December 2001, Pace's trade credit insurer, NCM, informed Pace that it waswithdrawing insurance cover in respect of all of Pace's future shipments to NTLincluding the October 2001 order. This withdrawal meant that future paymentsowed by NTL were no longer guaranteed. The matter was not drawn to the attentionof the company's corporate brokers and the withdrawal of insurance cover was notmentioned in the Interim Results statement published on 8 January 2002. Pace's Interim Results Announcement on 8 January 2002 showed that the expectedturnover for the year ending 1 June 2002 would be broadly similar to theprevious year's turnover of £524 million. Key to the realisation of the forecastfigure was the receipt of the revenue from NTL's purchase of the 300,000 boxes. Trading Statement of 5 March 2002 On 4 February 2002, Pace changed its expectation of its revenue for itsfinancial year ending 1 June 2002, to £455 million, which was 12.5% less thanthe market consensus of £520 million. This information was not announced to themarket. On 4 March 2002 Pace commenced a review of its performance which indicated thatthere had been a marked deterioration in its forecasted revenue for thefinancial year ending 1 June 2002 from £455 million on 4 February to £350million. This further change in expectation represented a decrease ofapproximately 30% from the forecast of £524 million implied by the InterimResults of 8 January 2002. Pace issued a Trading Statement on 5 March 2002 setting out its change inexpectation. Following the announcement, Pace's share price fell nearly 67% from£3 to £1 at the close of trading. NOTES FOR EDITORS 1. The full text of the Final Notice, dated 26 January 2005, will beavailable on the FSA website. This includes the background to the case, therelevant statutory provisions and the regulatory requirements contravened andthe factors taken into account by the RDC when setting the level of the fine. 2. Financial penalties are not treated as income by the FSA. They are applied for the benefit of authorised persons (or the issuers of securities admitted to the official list) as appropriate, and so given back to the industry in subsequent years. 3. PACE Microtechnology is a publicly listed company whose shares are traded on the LSE. 4. Paragraph 9.2 of the version of the Listing Rules, which applied at the time, states that: "A company must notify the Company Announcements Office without delay of allrelevant information which is not public knowledge concerning a change: (a) in the company's financial condition; (b) in the performance of its business; or (c) in the company's expectation as to its performance; which, if made public, would be likely to lead to substantial movement in theprice of its listed securities." 5. Paragraph 9.3A of the version of the Listing Rules, which applied at thetime, stated that: "A company must take all reasonable care to ensure that any statement orforecast or any other information it notifies to the Company AnnouncementsOffice or makes available through the UK Listing Authority is not misleading,false or deceptive and does not omit anything likely to affect the import ofsuch statement, forecast or other information." 6. Under section 91(1) of the Financial Services and Markets Act 2000 ifthe FSA considers that an issuer of listed securities has contravened theListing Rules, it may impose a penalty of such amount as it considersappropriate. 7. FSA took on new powers under the Financial Services and Markets Act 2000 on 1 December 2001. The disciplinary sanctions available to the FSA for breaches of the Listing Rules that take place on or after 1 December 2001 include a fine or a public statement. 8. The FSA has taken action for Listing Rules breaches in the following cases since 1 December 2001 - Marconi, SFI, Sportsworld, Universal Salvage and Shell. 9. The FSA wrote to listed retail companies, on 15 December 2004, reminding them of their duties under the Listing Rules to keep the market informed without delay of any developments in their businesses. 10. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the appropriate degree of protection for consumers; and fighting financial crime. 11. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve our business capability and effectiveness. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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