FCA imposes first ever fine under EU market abuse rules

Tejoori Ltd, a small, self-managed close-ended investment company, which at the time, was listed on the Alternative Investment Market (AIM), was fined £70,000 for failing to inform the market of inside information, as required by the Market Abuse Regulation (MAR). The fine incorporated a 30% discount to reflect Tejoori's self-report of the breach and cooperation with the FCA's investigation.

FCA enforcement director Mark Steward said that the company's breach had "misled the market" about its shares and "prevented investors from making fully informed investment decisions".

"Issuers must have regard to their disclosure obligations at all times and misunderstanding the commercial reality of a transaction is no excuse," he said.

Tejoori has since cancelled its AIM listing.

MAR came into force on 3 July 2016. Article 17(1) of the regulation requires a listed company to inform the public as soon as possible of any inside information which directly concerns it, and which therefore could impact the value of its shares.

Tejoori was listed on AIM between 24 March 2006 and 5 December 2017. In early 2016, the company held two material investments including a $3.35 million shareholding in Bekon, a German waste plant company. On 12 July 2016, BEKON notified Tejoori about a takeover by German kitchen company Eggersmann Gruppe, which required Tejoori to sign a share purchase agreement and to sell its Bekon shares to Eggersmann at an anticipated loss.

The Bekon shares were transferred to Eggersmann on 10 August 2016, and both companies issued press releases announcing the acquisition the following day. These press releases made no reference to Tejoori, so the market was unaware of the terms of the trade. The market went on to speculate on online forums about the amount that may have been paid to Tejoori as part of the acquisition, leading to a 38% increase in share price.

The London Stock Exchange (LSE) contacted Tejoori's nominated advisor the following morning to query the sudden share prince increase. Tejoori told its advisor that it did not hold any inside information and that it had not sold its shares in Bekon, based on a misunderstanding of the legal effect of the SPA. The adviser only learned of the correct position later. Tejoori then released an announcement confirming that it had sold the shares for "no initial consideration", and that it did not know whether it would receive any future consideration. Its share price fell by 13% the following day.

According to the FCA, Tejoori was under an obligation to inform the market about the terms of the sale "as soon as possible after ... 12 July 2016", when it was informed of the Eggersmann takeover.

"Tejoori misunderstood the commercial nature of the transaction it entered into and therefore did not disclose material information which misled the market," said financial regulation expert David Heffron of Pinsent Masons, the law firm behind Out-Law.com.

"Whilst dependant on its own facts and Tejoori's misunderstanding, the case demonstrates the FCA's willingness to take action where issuers fail to promptly disclose inside information," he said.