Summaries published in 2022
| PR-2022/001 |
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| PRIVATE REPRIMAND against one former executive director |
| Rules |
Rule 3.08(f) and Director's Undertaking |
| Summary |
The company breached Rule 2.13(2) as its financial results and report contained information that was not accurate and complete in all material respects.
The relevant director breached Rule 3.08(f) and the director’s undertaking in failing to procure the Company’s compliance with the Rules. Amongst other things, the director failed to ensure that bank reconciliation was performed before the financial results and report were approved for publication.
The director had taken remedial steps to improve the company’s internal control system after the issue was discovered. The director agreed to settle the disciplinary action. |
| PR-2022/002 |
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| PRIVATE REPRIMAND against one former non-executive director |
| Rules |
Rule 3.08(f) and Director’s Undertaking |
| Summary |
The company failed to comply with various requirements under Chapters 13, 14 and 14A relating to notifiable and connected transactions.
The relevant director breached Rule 3.08(f) and the director’s undertaking in failing to ensure the company had adequate and effective internal controls. The company did not have adequate and effective controls at the time, and the relevant director had not demonstrated taking steps to address certain known control deficiencies.
The director had been involved in enhancing the company’s financial management. The director had been given comparatively less access to relevant information than members of the audit committee and executive management.
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| PR-2022/003 |
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PRIVATE REPRIMAND against three independent non-executive directors
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| Rules |
Director's Undertaking |
| Summary |
The company breached disclosure obligations under Chapters 13 and 14 of the Listing Rules in respect of various transactions. Whilst the company had some internal controls, there were material inadequacies.
Three independent non-executive directors were found to have breached their director’s undertakings. Amongst other things, the internal controls did not impose limits on approval rights, and the INEDs had not ensured that proper annual reviews of internal controls were conducted.
The INEDs had taken an active role with respect to the company’s affairs and processes in that they had, among other things, taken some steps to assess the internal control systems, including interacting with the auditors of the company during the annual audit process. Whilst the inadequate internal controls contributed to the company’s disclosure obligation breaches, the executive directors had contravened some of the controls that were in place. |
| PR-2022/004 |
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PRIVATE REPRIMAND against one former non-executive director
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| Rules |
Rule 3.08(f) and Director’s Undertaking |
| Summary |
The company breached the disclosure and shareholders’ approval requirements under Chapters 13, 14 and 14A in relation to a series of notifiable and connected transactions. There were significant deficiencies in the company’s internal controls, including a lack of procedures relevant to compliance with Chapter 14. There were notable deficiencies at the subsidiary level, including a lack of Rule awareness amongst staff and a failure by staff to comply with internal procedures. The deficiencies contributed to the company’s breaches in respect of the transactions.
The relevant director breached Rule 3.08(f) and the director’s undertaking by failing to ensure the company maintained adequate and effective internal controls. The director joined the board after the series of transactions had started and did not know about them at the time. The director appeared to have relied overly on the company’s internal audit function, without considering the adequacy of its resources (it had only one staff), or the quality of its review work. |
| PR-2022/005 |
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PRIVATE REPRIMAND against one former executive director and two former independent non-executive directors
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| Rules |
Rule 3.08(f) and Director’s Undertaking |
| Summary |
The company failed to comply with the procedural requirements in Chapters 14 and 14A with respect to discloseable and connected transactions. The company lacked adequate internal controls with respect to notifiable and connected transactions, financial reporting and conflicts of interest.
The relevant directors breached their duties of skill, care and diligence (Rule 3.08(f)) and did not use sufficient endeavours to procure the company’s Rule compliance. Their breaches arose from, amongst other things, a failure to take an active interest in the company’s operations and use of its financial assets, a failure to ensure that adequate and effective internal controls were in place to safeguard assets and to identify and report connected and notifiable transactions, and a lack of proactivity in enhancing internal controls. One director’s breaches appeared to arise from a failure to understand that the board has a general responsibility for a company’s internal controls, and that there is no exemption from that duty for a director appointed primarily for marketing purposes.
The board had taken some steps to identify and improve the internal controls. One director had engaged professional advisers to review the internal control system shortly after his appointment. The company had also adopted certain recommended measures to improve the internal control system, such as establishing a checks and balances system, and enhancing the resources and reporting lines of the internal audit function. |
| PR-2022/006 |
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PRIVATE REPRIMAND against five non-executive directors and independent non-executive directors
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| Rules |
Rule 3.08(f) and Director’s Undertaking |
| Summary |
The company breached obligations under Chapters 13, 14 and 14A of the Listing Rules in respect of various transactions. There were material deficiencies in the company’s internal controls at the time, including loopholes in the approval system used for payments, and a failure to enforce robustly policies intended to operate as checks and balances on the approval powers of executive directors.
The relevant directors breached their duties of skill, care and diligence (Rule 3.08(f)) and did not use sufficient endeavours to procure the company’s Rule compliance. This included a failure to take sufficient active steps to ensure the company maintained effective and adequate internal controls. The directors had misplaced reliance on the company’s then existing system, on the basis that it had been able to identify some connected transactions. The risks that the system might not identify all connected transactions, and/or could be open to abuse, should have been proactively addressed.
The relevant directors had demonstrated some involvement in the company’s internal controls, including making some constructive recommendations for improvement, and taking follow-up actions to ensure recommendations had been dealt with. |
| PR-2022/007 |
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PRIVATE REPRIMAND against one current and two former independent non-executive directors
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| Rules |
Rule 3.08(f) and Director’s Undertaking |
| Summary |
The company had entered into, and disclosed to the market, an arrangement which had been established to protect the interests of shareholders. However, there was a failure to maintain and implement effective internal controls for compliance with the arrangement. The company also inaccurately confirmed in subsequent announcements that there had been compliance with the arrangement.
The directors breached Rule 3.08(f) and their Undertakings by failing to procure the company‘s compliance. The directors agreed to settle the disciplinary action. |