Regulations and Law

Metro Bank, Improving Accounts, Patisserie, Telford Homes and GoCompare

Originally posted 28th February 2019 The latest example of a public company publishing misleading accounts is Metro Bank (MTRO). Both the FCA and PRA (the bank regulator) are looking into the “misclassification” of some loans which resulted in the bank overstating its regulatory capital. The result was that it has had to do an equity share issuance to bolster its capital. There was a very good letter to the FT today on the subject of improving accounting and audits from Tim Sutton. He ...

The Unstoppable Glacier of Government’s Concerted Actions?

By Cliff Weight, Director, ShareSoc We sometimes see things changing at a glacier-like pace. But once a glacier starts moving it has huge momentum and is unstoppable. My question is: is this metaphor applicable to the way Government is behaving with regard to business? The civil servants who drive Government policy transcend the short lives of Parliament. Taking this perspective what do we see? My take on this is as follows. The Financial Crisis terrified nearly everyone. We stared into the abyss. We were ...

Inconvenient AGM at Phoenix, Changes to “Going Concern” and GoCompare

I have been advised that life insurance and pension consolidator Phoenix Group (PHNX), a FTSE 250 company, is holding this year’s AGM in Edinburgh at 9.00 am. That’s a damn inconvenient time and location for most investors. Previous general meetings have been held in London where their registered office is located, although I am told that only one director and no shareholders turned up for the 2018 AGM. This is the explanation given by the company for the latest venue in the ...

Quindell (Watchstone), SFO Inaction and Tungsten Corporation

The Daily Telegraph this morning (25/2/2019) disclosed that law firm Harcus Sinclair is preparing a legal case for investors who lost money in Quindell (now renamed Watchstone). Quindell was once the largest AIM company – valued at £2.6 billion. But its accounts were extremely dubious and many investors think they were downright fraudulent. The company is still being investigated by the Serious Fraud Office (SFO) but only two days ago it was announced that the SFO was dropping investigations into Rolls-Royce ...

Stephen Haddrill, CEO, FRC sees the light and gets tougher.

Stephen Haddrill, head of the Financial Reporting Council, appeared before MPs in one of a series of hearings held by the Commons Business, Energy and Industrial Strategy Committee to examine the future of the auditing industry in the wake of a number of scandals involving overstatement of profit and insolvency. When asked whether the FRC and other regulators were “too passive and reactive”, Mr Haddrill acknowledged that he should have been less afraid to challenge companies in the courts and less accepting ...

The trouble with net debt…

Net debt is a vital metric for investors and lenders. What ultimately kills companies is when they are unable to pay their debts when due. Hence, measuring the ratio of net debt to profits (and cashflow) is crucial to judging a company's ability to pay and whether it is likely to find itself in trouble, potentially leading to a permanent loss of capital for investors. Therefore it is very troubling that there have been several instances in recent years where reported net ...

IC Share Tips, National Grid, Brexit and the Audit Market

This week’s Investors Chronicle edition (dated 28/12/2018) provides lots of food for thought. One of the most educational is their review of the share tips they published as “tips of the week” in 2018. Unlike some investment publications, who simply forget about their past tips that go nowhere, while lauding their hits, the IC is open about their performance. They issued 173 “BUY” tips and 24 “SELL” tips in the year. That is quite some achievement by itself as I rarely have ...

Market Trends, Interest Rates, Glaxo and Yu Group Accounts

Yesterday was another dismal day in the markets. The US fell significantly allegedly caused by the rise in interest rates announced by the Federal Reserve and the UK market followed it down this morning. The US rate rise was widely expected although perhaps slightly lower estimates for US economic growth had an impact. But when the markets are in a bear mood, excuses for selling abound. Meanwhile the Bank of England has announced today that their base rate will remain at ...

Blancco AGM and Regulatory Landscape

Today I attended the Annual General Meeting of Blancco Technology Group (BLTG). This technology company is now focused on the data erasure market which is surely a growing one. I have commented on this company before (see links below), particularly as the company, and its shareholders, seemed to be a victim of false accounting – an issue that is way too prevalent of late. The legal framework under which companies, their directors and the regulatory bodies operate just seems to be too ...

Acquittals Over Tesco Fraud

Yesterday (6/12/2018) was another sad day for those who would like to stop false accounts being published by public companies. Two former executives of Tesco who had been charged with their involvement in the inflating of Tesco’s profits by including supplier credits were discharged by the court on the basis that they had no case to answer. The judge, Sir John Royce, said the case was so weak that it should not be put to a jury. It appears that the problem ...

Banks Claims Group Limited, FCA and RBS

Neil Mitchell, who ran Torex Retail before he blew the whistle on an earlier fraud at the software company and RBS’s Global Restructuring Group took control of the business, has applied for a judicial review of a UK Financial Conduct Authority decision in July that its options for taking action were “limited”. Neil, who claims to represent 530 complainants affected by alleged wrongdoing at GRG, alleges in his judicial review application that the FCA has been “unlawfully refusing or failing” to ...

Autonomy, FRC Meeting, Retailers and Brexit Legal Advice

The big news last Friday (30/11/2018) was that former CEO Mike Lynch has been charged with fraud in the USA over the accounts of Autonomy. That company was purchased by Hewlett Packard who promptly proceeded to write off most of the cost – see this blog post for more information: https://www.sharesoc.org/blog/regulations-and-law/belated-action-by-frc-re-autonomy/. As this was a UK company, are we anywhere nearer a hearing in the UK over the alleged “creative accounting” that took place at the company and the failure of the ...