Now, here’s something for purveyors of scandals on London’s junior market – a public censure and £225,000 fine.
The culprit is Blue Oar Securities (now called Astaire Securities), which the LSE says failed to discharge its responsibilities as a nominated adviser (nomad) to Worthington Nicholls, a former high-flying AIM stock.
The statement makes for fascinating reading, and while the LSE should be applauded for naming and shaming those involved we can’t help feeling this is another nail in the coffin for the nomad system of self regulation.
The full statement can be found here, but here are some highlow-lights.
As set out in this censure, these breaches related to Blue Oar’s conduct as nominated adviser to an AIM company, Worthington Nicholls Group plc (now Managed Support Services plc) (the “Company”), during the Relevant Period, in respect of which Blue Oar:
• failed to assess adequately the Company’s appropriateness for AIM prior to admission;
• failed to carry out appropriate due diligence and to advise the Company properly regarding certain disclosures at admission;
• failed to advise the Company properly in respect of certain announcements after admission;and
• failed on one occasion to liaise appropriately with the Exchange
And an example of what went wrong:
29 June 2007 Announcement
The Company stated in its announcement on 29 June 2007 that “We expect profit margins across the Group to remain stable for the full year as a whole recognising the benefit derived from the increased run rate of revenue in the second half of the financial year … I am very pleased with the development of the group to date and have full confidence of its continued performance in the future”.
As at the date of this announcement, Blue Oar had been provided by the Company with financial forecasts as at April and June 2007 which identified that, as of May 2007, the Company’s revenue figures year-to-date were 9% short of budget. Furthermore, the Company’s expectations of ‘secured’ revenue (which the Company had described to Blue Oar as “likely sales”) to the end of the year was almost 20% below market expectations.
Against the background of a significant revenue shortfall against budget and the unlikelihood of the Company meeting market expectations, the above statements made in the announcement were misleadingly positive and omitted material information to put them into context. Blue Oar did not, however, take appropriate steps to ensure that the wording of the Company’s announcement was amended.
Actually, we wonder if a public censure and a fine of £225,000 is really enough here, given the scale of the breaches.
Amazingly Worthington Nicholls remains listed, although it has a different name – Managed Support Services – and there’s no sign the company will again trade at the 166p seen when it first listed. In the absense of any trade, the quote on Monday was just 10p.