City watchdog fines ex-Carillion finance chiefs for market manipulation
The City watchdog has fined the former finance directors of collapsed construction firm Carillion for their role in making “misleading” statements from the company.
The Financial Conduct Authority (FCA) said both Richard Adam and Zafar Khan were aware of “serious financial troubles” in Carillion’s UK business but failed to reflect this in company announcements.
Adam has been slapped with a £232,800 fine and Khan with a £138,900 fine following the pair’s withdrawal of their challenges to the watchdog’s decision.
“Those in positions of responsibility have a duty to keep the market accurately and adequately informed,” Steve Smart, joint executive director of enforcement and market oversight at the FCA, said.
“With Carillion, we have seen the serious impact it can have when they don’t. The action taken against Mr Adam and Mr Khan demonstrates our commitment to preventing market abuse and upholding the standards we expect.”
The FCA said the financial penalties related to market manipulation stemmed from the directors knowingly giving misleading signals regarding the value of its shares. They were also found to have failed to take “reasonable steps” to ensure it maintained adequate procedures and complied with obligations under listing rules.
Commenting on the fines, Chris Roberts, partner at Grosvenor Law, stated: “It is interesting to note that Adam and Khan each benefited from 10 per cent discounts on their fines due to their cooperating with the FCA – in relation not only to their personal actions but also ‘other investigations.”
KPMG roped in Carillion collapse
Carillion went under in 2018, saddled with almost £7bn in debts, resulting in more than 3,000 job losses. Adam served as a finance director from April 2007 to the end of 2016, whilst Khan was a director from the beginning of 2017 til September of the same year.
The firm was a top client of Big Four accountant KPMG, which led to the consultancy giant being fined £20.9m by the Financial Reporting Council (FRC) in 2023.
KPMG was also made to stump up £5.3m for the costs of two investigations by the FRC’s executive counsel.
The regulator said the firm failed to adopt a “rigorous and robust approach” in its audit of Carillion, with two senior employees facing sanctions by the FRC.
The collapse of Carillion is estimated to have cost taxpayers around £150m, with the firm operating a number of UK government contracts.