The Financial Services Authority (FSA) has fined Woolworths Group plc 350,000 for failing to disclose information to the market in a timely manner.
On 20 December 2005, Woolworths became aware of a variation to the terms of a major supply contract of one of its subsidiaries, Entertainment UK (EUK). The effect of the variation was to reduce Woolworths’ profits for the year 2006/07 by an estimated 8 million. This was inside information as it was likely to have a significant effect on Woolworths’ share price and should therefore have been disclosed to the market as soon as possible.
Woolworths’ failure to identify inside information and subsequently disclose this information until its scheduled Christmas trading update on 18 January 2006 created a false market in its shares which breached Disclosure Rule 2.2.1 and Listing Principle 4.
“Clean, efficient and orderly markets depend on timely and proper disclosure of relevant information. Woolworths’ failure to disclose vital information led to a false market in its shares for 29 days. This sort of failure is unacceptable. Investors deserve, and the FSA expects, higher standards than Woolworths showed. We will not hesitate to take action where listed companies fail to meet obligations imposed by the Rules and Principles,” says Margaret Cole, director of Enforcement, FSA.