This is the first penalty imposed on a company by the FSA for breaches of the Listing Rules and Listing Principles relating to compliance with the Model Code. From a Financial Services Authority press release on 14 February 2013:
“The Financial Services Authority (FSA) has fined Nestor Healthcare Group Limited (Nestor) £175,000 for failing to take adequate steps to ensure that its board members and senior executives complied with the share dealing provisions of the FSA’s Model Code.
Nestor had a policy on how senior Nestor staff intending to trade in the company’s shares should obtain clearance to deal. The FSA has found that the breaches occurred principally because Nestor’s weak procedures allowed for this policy to be forgotten by the board. This, with other factors, led to purchases of Nestor shares by board members being carried out in breach of the Model Code, which lays down minimum procedural standards.
In the period 18 October 2006 to 30 June 2010 Nestor was listed on the Main Market of the London Stock Exchange. Under the Listing Rules, Nestor was required to take all proper and reasonable steps to secure the compliance of its persons discharging managerial responsibility with the Model Code.
Throughout this time Nestor did not issue any reminders about its own share dealing rules (which largely reflected the Model Code), review them or identify that breaches of the Model Code had occurred. Nestor employed an informal approach to granting dealing approval and largely relied on the experience and knowledge of its directors to ensure that the appropriate compliance was met. This approach was inadequate and contributed to the company’s failings.”
And from the notes to the press release:
“The Model Code imposes restrictions on dealing in the securities of a listed company beyond those imposed by law. Its purpose is to ensure that persons discharging managerial responsibilities do not abuse, and do not place themselves under suspicion of abusing, inside information that they may be thought to have, especially in periods leading up to an announcement of the company’s results.
A person discharging managerial responsibilities who is given clearance to deal must deal as soon as possible and in any event within two business days of clearance being received.
Listing Rule 9.2.8 requires a listed company to require every person discharging managerial responsibilities, including directors, to comply with the Model Code and to take all proper and reasonable steps to secure their compliance. Listing Principle 1 states that a listed company must take reasonable steps to enable its directors to understand their responsibilities and obligations as directors. Listing Principle 2 states that a listed company must take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations.”
The Final Notice is here.
Company and Financial Law 