FCA to censure former Carillion bosses for ‘recklessly misleading’ markets and investors

The City watchdog intends to censure Carillion and some of its executive directors after finding they “recklessly misled” markets and investors over the deteriorating state of its finances before the company collapsed into liquidation two years ago.

Carillion was one of the government’s biggest contractors, with work spanning the construction of roads and rail infrastructure to running school canteens. Its collapse was the biggest corporate failure in the UK in a decade and prompted criticism of its executives, auditors and the handling of public sector contracts by private companies.

On Friday, the Financial Conduct Authority said it had issued a formal warning notice to Carillion and certain former executive directors in September that set out breaches of securities rules in market announcements made in 2016 and 2017 as the company’s spiralling debt pushed the business towards liquidation.

The FCA did not name individuals, but said: “They made misleadingly positive statements about Carillion’s financial performance generally and in relation to its UK construction business in particular. [The statements] did not reflect significant deteriorations in the expected financial performance of that business and the increasing financial risks associated with it.”

The watchdog said it proposed a “public censure” of Carillion and the executive directors, who it said had acted “recklessly”, but added that it would not seek to impose any financial penalties.

“At material times, the relevant executive directors were each aware of the deteriorating expected financial performance within the UK construction business and the increasing financial risks associated with it,” the FCA said. “They failed to ensure that those Carillion announcements for which they were responsible accurately and fully reflected these matters. The FCA considers that Carillion and the relevant executive directors acted recklessly.”

Prem Sikka, emeritus professor of accounting at Essex Business School, condemned the FCA for failing to impose a financial penalty to serve as a warning to other companies, tweeting:

Carillion and the executive directors facing censure will have an opportunity to challenge the FCA’s findings at an independent committee that will decide if sanctions are warranted. They can then appeal any decision at an Upper Tribunal.

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