FCA launches criminal proceedings with former Redcentric employees
25 Sep 2020
The Financial Conduct Authority (FCA) has confirmed it is taking criminal proceedings against three former executives of Redcentric, after the IT services provider was given a public censure for committing market abuse and ordered to pay £11.4m compensation to investors
25 Sep 2020
Fraser Fisher, former chief executive; Timothy Coleman, former chief financial officer; and Estelle Croft, a former finance director have each been charged with two counts of making a false or misleading statement, contrary to Section 89(1) of the Financial Services Act 2012.
Coleman has further been charged with four counts of false accounting, contrary to Section 17(1)(a) of the Theft Act 1968; one count of making a false or misleading statement to an auditor contrary to Section 501 of the Companies Act 2006; and one count of fraud by false representation, contrary to Sections 1 and 2 of the Fraud Act 2006.
Croft has also been charged with seven counts of making a false or misleading statement to an auditor contrary to Section 501 of the Companies Act 2006, and four counts of false accounting, contrary to Section 17(1)(a) of the Theft Act 1968.
The alleged offending took place between 1 May 2015 and 31 October 2016.
Making a false or misleading statement is a criminal offence punishable, on conviction, by a fine and/or up to seven years’ imprisonment.
The FCA conducted a three-year investigation into the AIM-listed company which found it had issued unaudited interim results and audited final year results which materially misstated its net debt position and overstated its true asset position in circumstances where it knew, or ought to have known that the information was false and misleading.
As a result, investors were misled and paid more when purchasing shares than they would have done had they known the true position. The FCA estimates the losses to affected shareholders to be approximately £43m.
The FRC opened its investigation in 2017. The previous year Redcentric revealed an internal investigation by its audit committee had uncovered ‘misstated accounting balances’, which meant it delayed reporting interim results for the six months ended 30 September 2016.
The FCA said Redcentric knew or could reasonably have been expected to know that the information in respect of cash and net debt, published on 9 November 2015 and 16 June 2016 was false or misleading.
The FCA’s findings against the firm are separate to the action being taking against the individuals.
A year ago, the regulator fined PwC £6.5m and issued a severe reprimand for failures of professional scepticism over the firm’s auditing of the IT services provider. Two of the firm’s partners in its Leeds office were also sanctioned.
The fine, which was discounted to £4.55m for admissions and early disposal, related to the statutory audits of Redcentric’s financial statements for the financial years ending 31 March 2015 and 31 March 2016.