Tesco to pay £129m fine and compensate shareholders over accounting scandal
The Financial Conduct Authority (FCA) said Tesco has agreed it committed market abuse in relation to a trading update published on 29 August 2014, which gave a false or misleading impression about the value of publicly traded Tesco shares and bonds.
Tesco will pay compensation to investors who purchased Tesco shares and bonds on or after the 29 August 2014 and who still held those securities when the statement was corrected on 22 September 2014. The regulator estimates 10,000 retail and institutional eligible investors will be eligible for redress.
The scheme is expected to cost Tesco £85m, before accrued interest is added to claims.
This is the first time the FCA has used its powers to require a listed company to pay compensation for market abuse.
Andrew Bailey, chief executive of the FCA, said: “Dissemination of information that gives a false or misleading impression as to traded securities harms the integrity of our markets. The FCA is committed to UK markets being fair, transparent and thus competitive. Tesco and its board are doing the right thing here, taking appropriate responsibility and agreeing to rectify the consequences of the misconduct. They have cooperated fully with us and this sets a good example for the market and so is a good outcome for Tesco and investors.”
The accounting scandal saw the supermarket giant publish a trading update saying it expected trading profit for the six months ending 23 August 2014 to be in the region of £1.1bn. On 22 September 2014, Tesco published a further trading update which said it had “identified an overstatement of its expected profit for the half year.”
The FCA said Tesco “knew or could reasonably have been expected to know that the information in the 29 August 2014 announcement was false or misleading”.
Dave Lewis, Tesco Group Chief Executive, said: “Over the last two and a half years, we have fully cooperated with this investigation into historic accounting practices, while at the same time fundamentally transforming our business. We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand.”