FSA FINES A COMPANY AND A DIRECTOR A TOTAL OF £100,000 FOR BREACH OF THE LISTING RULES AS TO PROMPT NOTIFICATION OF MAJOR NEW DEVELOPMENTS WHICH ARE NOT PUBLIC KNOWLEDGE

1 Introduction

Further to our April Public Companies Update, another director of a listed company has been fined by the FSA. The Financial Services and Markets Act 2000 ("FSMA") appoints the FSA as the regulator of the financial services industry. Section 91 of FSMA grants the FSA the power to issue public statements of censure or impose financial penalties on both companies and directors of companies in breach of the Listing Rules, of such amount as the FSA considers appropriate.

2 Universal Salvage PLC

Universal Salvage PLC ("Universal") is involved in the vehicle salvage business. It won a contract with Direct Line in 1998, which by March 2002 accounted for 40% of its work. The contract had been open to tender since 2001 but Universal continued to carry out the work.

At a meeting with Universal on 18 March 2002, which included Mr Hynes, a director of Universal and the then Chief Executive Officer, Direct Line informed Universal it had lost the tender. Universal considered this may be a negotiation tactic and wrote to Direct Line defending why it should be retained. Direct Line informed Universal of its final decision on 16 April 2002.

The next Board Meeting of Universal was scheduled for 18 April 2002. Despite the fact that it had been on notice since March of the possible termination of the contract, the FSA found that Universal decided not to bring the Board Meeting forward or to take any steps to obtain advice from WestLB, its financial advisers and stockbrokers, in anticipation of the need to make an announcement to the market.

At the Board Meeting, Mr Hynes was given the responsibility of consulting with WestLB, who he arranged to meet 4 days later. An announcement was made on 23 April 2002 and that day the share price of Universal fell by approximately 55%.

3 Notification of new developments to the market

Listing Rule 9.1 requires listed companies to notify a Regulatory Information Service without delay of any major development which may lead to substantial movement in the price of its listed securities. The FSA advised in its notice to Universal that the obligation to inform the market is a fundamental protection for shareholders. The requirement of the Listing Rules is an overriding obligation and listed companies should make use of their advisers to assist in determining whether information is potentially price sensitive.

Listing Rule 16.2 states that a listed company must ensure that its directors accept full responsibility for compliance with the Listing Rules. The FSA considers that Mr Hynes was knowingly concerned in Universal's contravention of the Listing Rules as he was personally involved at all stages and was the principal point of contact with WestLB. The FSA advised that Mr Hynes was given personal responsibility for seeking advice from WestLB at the Board Meeting 18 April 2002 and did not fulfil that task with appropriate urgency.

4 Conclusion

The FSA has imposed a penalty of £90,000 on Universal and £10,000 on Mr Hynes personally. It making its decision the FSA took into account the fact that Universal has taken subsequent steps to prevent a recurrence and that neither Universal nor My Hynes has been disciplined before. Andrew Proctor, Director of Enforcement at the FSA, said "That this is the second director of a listed company that we have fined in as many months demonstrates how seriously we expect firms to take these responsibilities".


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