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Ex-Cattles FDs banned over market abuse

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30th Mar 2012
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The Financial Services Authority (FSA) has fined and banned three former directors of Cattles and its subsidiary Welcome Financial Services for publishing misleading information to investors about the credit quality of Welcome’s loan book.

The sub-prime lender directors acted “without integrity in discharging their responsibilities” and now face a total fine of £700,000.

James Corr, Cattles’ FD and ICAEW member, and Welcome FD Peter Miller have been fined £400,000 and £200,000 respectively. Both have been banned from performing any functions in relation to any FSA regulated activities.

The FSA also banned Welcome managing director, John Blake, and fined him £100,000. However Blake has referred his case to the Upper Tribunal.

All three fines were reduced on account of the directors’ current personal financial circumstances.

According to the FSA Cattles’ 2007 annual report contained “highly misleading” arrears, impairment and profit figures.

It stated that just £0.9bn of Welcome’s £3bn loan book was in arrears, when if accounting standards had been properly applied the correct figure would have been around £1.5bn.

Cattles also announced a pre-tax profit of £165.2m, when in fact it suffered a pre-tax loss of £96.5m.

The figures from the report were also included in a rights issue prospectus that Cattles released to potential investors in April 2008, therefore giving misleading impressions of the firm’s financial health.

On 2 March 2011 Cattles announced a scheme of arrangement under which its shareholders would receive only 1p for each share, compared with a rights issue price of £1.28.    

The FSA found that Welcome breached Principle 3 of its ‘Principles for Businesses’ by failing to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: "In order for markets to function properly, information given to investors must be accurate.  Directors of listed companies must act with integrity and exercise appropriate diligence when making disclosures to the market.”

Last year PwC was under fire over their audit of Cattles. The lender claimed in a court hearing that PwC’s audits of the firm between 2005 and 2007 led to a “gross misstatement” of its financial position.

The Accountancy and Actuarial Discipline Board (AADB) is currently investigating the work of the accountants involved.

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By johnjenkins
04th Apr 2012 11:11

See what happens

when you use the "simplified" cash accounting method

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By jemetpl
04th Apr 2012 13:37

I never believed in karma until I read this.  I hope the FSA appoint suitably vicious debt collectors to get the fines.

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