Tesco To Pay Compensation Of £85 M And Further Fine Of £129 M For Market Abuse

On 28 March 2017, the FCA announced that Tesco plc and Tesco Stores Limited ("Tesco") had agreed to committing market abuse in relation to a trading update published on 29 August 2014. In that update, Tesco plc had stated that it expected trading profit for the six months ending 23 August 2014 to be in the region of £1.1 billion. A correction was then published on 22 September 2014 in which it was announced that Tesco plc had "identified an overstatement of its expected profit for the half year". The FCA has found that Tesco knew or could reasonably have been expected to know that the information in the 29 August 2014 announcement was false or misleading.

Tesco have agreed to 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 total amount to be paid under the compensation scheme is estimated to be approximately £85 million, plus interest. This is the first time the FCA has used its powers under section 384 of the Financial Services and Markets Act to require a listed company to pay compensation for market abuse.

It was also announced that Tesco Stores Limited had entered into a deferred prosecution agreement with the Serious Fraud Office relating to false accounting, pursuant to which it will pay a fine of £128,992,500. The FCA has stated that, in light of the conduct of Tesco plc and Tesco Stores Limited in accepting responsibility for market abuse, in agreeing to the first compensation order under section 384 and, in the case of Tesco Stores Limited, for accepting responsibility for false accounting, the FCA will not impose any additional sanctions for market abuse.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.