Photo-Me International Plc, a maker of photo mini-labs, was fined 500,000 pounds ($742,000) by the U.K. securities regulator for failing to quickly disclose inside information to the market, creating a “false market.”
From September to December 2006, announcements by Surrey, England-based Photo-Me created expectations “it would benefit from the winning of large mini-lab sales contracts and strong mini-lab sales generally,” the U.K.’s Financial Services Authority said in a statement today.
In January 2007, Photo-Me was told it was one of several firms competing for the contract and in February realized it’s revised mini-lab forecast was lower than it initially expected. In March of that year, the company said its earnings would miss forecasts, driving its shares down 24 percent, the FSA said.
The FSA said the delay in disclosing the revised outlook led to a “false market” in the company’s shares for 44 days.
“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,” Margaret Cole, the FSA’s director of enforcement said in the statement. “Inside information must be announced to the market as soon as possible.”
Photo-Me disputed the FSA’s claim it didn’t act quickly enough, while saying it wouldn’t appeal the agency’s fine.
“The FSA has underestimated the real-time difficulties faced by the company in updating the market on the possible outcome of the relevant complex contractual negotiations,” Photo-Me said in a statement today. “However, the board has decided it is not in the best interests of shareholders to incur further legal costs” to pursue an appeal.
On June 17 Chancellor of the Exchequer George Osborne said he will abolish the Financial Services Authority and give most of its power to the Bank of England, undoing the regulatory system set up by Gordon Brown in 1997.
The FSA has recently beefed up regulation following complaints it did little to detect the financial crisis. The regulator won three of the four insider-trading prosecutions it has brought to trial.