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Photo-Me fined £500,000 by FSA
Wed, 08 Feb, 2012
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Photo-Me fined £500,000 by FSA
Mon, 21 Jun 2010, 10:18:00
The city watchdog today fined photo booth operator Photo-Me £500,000 for failing to disclose inside information to the market as soon as possible. The delay led to a false market in Photo-Me's shares for 44 days, the Financial Services Authority (FSA) said. In September, November and December 2006, Photo-Me made announcements that created an expectation in the market that it would benefit from the winning of large minilab sales contracts and strong minilab sales generally. On 17 January 2007 Photo-Me was informed that it was no longer engaged in exclusive negotiations for the Albertsons contract but rather that the contract was being re-tendered and the group was one of at least five competitors for the business. This was inside information and should have been disclosed as soon as possible, according to the FSA. By 12 February, Photo-Me had information that its January 2007 minilab sales had been 40% behind budget and that revised forecasts were predicting sales of only around 750 minilabs. This was also inside information and should have been disclosed as soon as possible. Despite having been warned by its auditors that the minilab sales target was challenging and needed close monitoring, it was not until Photo-Me's next scheduled quarterly board meeting on 1 March that it considered the effect of the inside information, after which a profit warning was issued on 2 March. Photo-Me's share price closed 24% lower that day. Margaret Cole, director of enforcement and financial crime at the FSA, said: "This is the largest fine of its type issued by the FSA and demonstrates our commitment to enforcing the UK Listing regime and ensuring clean, efficient and orderly markets." "Listed companies should assess, in a timely fashion, how any information they hold affects the accuracy of what they have previously disclosed to the market and whether this information is inside information. Inside information must be announced to the market as soon as possible to allow investors the opportunity to make informed investment decisions." The FSA has made no findings of regulatory breach against any past or present directors of Photo-Me in relation to this matter. In a statement following the FSA's announcement, Photo-Me said it maintains that the regulator has underestimated the real-time difficulties in updating the market on the possible outcome of the relevant complex contractual negotiations. However, the group decided it is not in the best interests of shareholders to appeal against the decision. Photo-Me said it provided for an expense in this connection of £500,000 in its financial statements for the year to 30 April 2009 and for legal costs billed to that date. The result for the year to 30 April 2010 will only reflect additional legal costs, which are not material, it added.
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