Statement re: promotion of shares in EMMIT plc

The Financial Conduct Authority (FCA) has been made aware that individuals are being encouraged to transfer money from their work pension schemes into Self-Invested Personal Pensions (SIPPs) and use that money to buy shares in Emmit plc, a company admitted to trade on AIM, a market operated and regulated by the London Stock Exchange (LSE).  Some investors are being offered “cash back” on their investments in Emmit plc, paid by a third party, as an incentive to do this.

The FCA has serious concerns that investors’ pensions are being put at risk.  The FCA has reason to be concerned that:

  • The individuals running this scheme appear to be targeting inexperienced investors who might not understand the full implications of what they are doing;
  • Investors are encouraged to transfer pension benefits into a SIPP and to purchase Emmit plc shares at a particular price from a particular market counterparty;
  • Some investors are incentivised to do this through  
    • Statements to the effect that this represents a good price for Emmit plc shares, because they normally sell at a much higher price; and/or
    • The offer of an immediate cash payment (of up to 30% of the transfer value of their pension) from a third party when they invest in Emmit plc shares;

Some investors appear to have invested 100% of their pension assets into Emmit plc shares and may suffer significant financial loss if they have done this without fully understanding what they are doing. Further, the cash incentive might amount to a withdrawal of assets from a pension scheme which could incur a significant tax liability on the investor.

To date at least 60-100 investors have invested in this scheme, and as much as £3m-£4m may have been invested by them.

Our review of trading in the shares of Emmit plc has shown that pension investors have constituted a significant proportion of the demand for the shares of Emmit plc, which may impact on the normal balance between supply and demand for these shares.  Emmit plc shares were trading at 6p a share in December 2013, and at 97p when suspended by the London Stock Exchange last week (having risen to over 200p earlier in the year).  Emmit plc’s market capitalisation is £17.8m.  According to Emmit plc’s last unaudited interim accounts, Emmit plc’s liabilities exceeded its assets as at 30 June 2014.

In the past, the FCA has asked SIPP operators to be vigilant and do proper due diligence to assess higher risk and unusual investments.  In this case, the FCA is grateful to have received proactive reports from a number of FCA authorised firms, which has helped us to bring this issue to the attention of investors.

We have taken action in this matter by publishing our concerns and liaising with the London Stock Exchange before our investigations are complete.  The London Stock Exchange undertook a precautionary suspension of the trading of the shares in Emmit plc on 17 October 2014.  If individuals or companies have further information about this matter, they should contact 0800 111 6768 (freephone), as should any individuals who have invested in Emmit plc shares and are concerned.

The FCA is not currently aware of any information that Emmit plc itself is complicit in the conduct set out above.

Notes to editors

  1. AIM is a market operated and regulated by the LSE.  The LSE is a Recognised Investment Exchange under Part XVIII of the UK's Financial Services & Markets Act 2000 (FSMA 2000) and therefore owes certain duties to the FCA.  The FCA and LSE are separate agencies with different remits: we have liaised closely in relation to this matter, including in relation to the suspension of trading in the shares of Emmit plc, and will continue to do so.
  2. The FCA’s (and FSA’s) previous warning on SIPPS - Alert; Pension transfers or switches with a view to investing pension monies into unregulated products through SIPPs - Further alert; and Dear CEO letter.
  3. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  4. 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.
  5. Find out more information about the FCA.