AIM Investment Company fined for failing to disclose inside information as soon as possible

The Financial Conduct Authority (FCA) has today fined Tejoori Limited (Tejoori) £70,000 for failing to inform the market of inside information as required by Article 17(1) of the Market Abuse Regulation (MAR).  This is the first fine the FCA has imposed on an AIM company for late disclosure following the introduction of MAR on 3 July 2016.

Tejoori is a self-managed closed-ended investment company whose shares were traded on AIM between 24 March 2006 and 5 December 2017. In early 2016, Tejoori had two material investments, one of which was a shareholding in BEKON Holding AG (BEKON) which Tejoori valued in its financial statements at USD 3.35 million. On 12 July 2016, Tejoori was notified by BEKON about a compulsory acquisition of its shares by Eggersmann Gruppe GmbH & Co. KG (Eggersmann). The acquisition required Tejoori to sign a share purchase agreement (SPA) and to sell its BEKON shares to Eggersmann for no initial consideration and with only a possibility of receiving deferred consideration that was materially lower than the value of Tejoori’s investment in BEKON.

The information about the sale to Eggersman was inside information and, under MAR, Tejoori was required to disclose the information as soon as possible. This did not happen.

Tejoori’s BEKON shares were ultimately transferred to Eggersmann on 10 August 2016 with both BEKON and Eggersmann issuing press releases announcing the acquisition the following day. The press releases made no reference to Tejoori so the market was unaware of the terms, including the consideration paid to Tejoori by Eggersman.

Without knowing these details, the market speculated, in online bulletin boards, about the amount that may have been paid to Tejoori. The bulletin board discussions regarded the sale as positive development for Tejoori and Tejoori’s share price rose sharply on 22 and 23 August 2016, increasing 38% over the two days.

The London Stock Exchange contacted Tejoori’s nominated advisor (Nomad) on the morning of 23 August 2016 to query the sudden rise in price and Tejoori informed the Nomad that it did not hold any inside information and that it had not sold its shares in BEKON. This was based on a misunderstanding of the legal effect of the SPA. The Nomad only obtained clarification of the correct position when Tejoori’s German legal adviser subsequently informed the Nomad that Tejoori had indeed sold its BEKON shares.

Tejoori ultimately released an announcement on 24 August 2016 which confirmed that Tejoori had sold its BEKON shares for no initial consideration and that it was unable to assess, at that time, whether it would receive any future consideration. Tejoori’s share price closed 13% down on the day of the announcement.

Tejoori breached Article 17(1) of MAR because it did not release an announcement about its shareholding in BEKON as soon as possible after being informed on 12 July 2016 that there was a reasonable expectation that it would be required to sell its shares in BEKON for no initial consideration and with only a possibility of receiving deferred consideration that was materially lower than Tejoori’s valuation of its investment.

Mark Steward, FCA Executive Director of Enforcement and Market Oversight, said:

“Tejoori’s failure to promptly disclose inside information misled the market in Tejoori’s shares and prevented investors from making fully informed investment decisions. This was a serious breach. Issuers must have regard to their disclosure obligations at all times and misunderstanding the commercial reality of a transaction is no excuse.”

Tejoori notified the FCA of its breach of Article 17(1) of MAR, providing an account of the events and it co-operated fully with the investigation. Tejoori agreed to settle at an early stage and qualified for a 30% discount under the Authority’s executive settlement procedures. Without this the financial penalty would have been £100,000.

Tejoori has now cancelled its admission to trading on AIM.

Notes to editors:

  1. Final Notice for Tejoori Limited (PDF)
  2. The Market Abuse Regulation (MAR) came into effect on 3 July 2016. It aims to increase market integrity and investor protection, thereby enhancing the attractiveness of securities markets for capital raising. MAR strengthens the previous UK market abuse framework by extending its scope to new markets, new platforms and new behaviours.
  3. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  4. Find out more information about the FCA.