U.K. Regulator Fines Cenkos $690,000 Over Scandal-Laden Quindellby
Financial Conduct Authority fine for systems, control failures
Quindell under investigation over accounts by U.K. prosecutors
Cenkos Securities Plc, a British securities firm for small and mid-cap companies, was fined 530,500 pounds ($690,000) by the U.K. markets regulator for failures in its role as an adviser to scandal-laden client Quindell Plc.
The Financial Conduct Authority said Tuesday Cenkos failed to carry out proper due diligence when recommending software company Quindell for an initial public offering on London’s main market in early 2014. The listing was abandoned after Cenkos failed to satisfy the FCA’s questions.
A criminal investigation into Quindell’s accounts was opened by the U.K. Serious Fraud Office in August 2015.
Cenkos failed to put in place adequate systems and controls to ensure proper oversight of its sponsor services, according to the FCA. The firm also failed to recognize what impact a negative research piece from Gotham City Research in April 2014 would have on Quindell. The report triggered a 39 percent one-day drop in its shares.
“Sponsor firms have key gatekeeper functions to ensure a candidate for listing is eligible and so they must carry out appropriate due diligence to the requisite standards," Mark Steward, FCA director of enforcement and market oversight, said in a statement. "The FCA will hold sponsor firms strictly accountable whenever these standards are not met.”
Sponsor firms advise companies on prospective listings and liaise with regulatory authorities on behalf of the firm.
"Since 2014, the company developed and implemented an extensive remediation program to enhance and improve its systems and controls in relation to its sponsor services," Cenkos said in a statement.
A spokesperson for Quindell, which is now known as Watchstone Group Plc, wasn’t immediately available to comment.