Release Date: 9th August 2016
To access the original FCA document, click here.
Summary
Cenkos Securities plc (Cenkos) has been fined £530,500 by the Financial Conduct Authority (FCA) for significant failings in its sponsor services business. The FCA found that Cenkos lacked appropriate systems and controls across its sponsor services and failed to perform its sponsor role with the required level of diligence and professional care on a specific transaction.
In early 2014, Cenkos incorrectly represented to the FCA that one of its clients was eligible for a Premium Listing without conducting the necessary due diligence. This misrepresentation led to the abandonment of the transaction, as Cenkos could not satisfy the FCA about the client’s eligibility.
Mark Steward, FCA Director of Enforcement and Market Oversight, emphasised the importance of sponsors in maintaining market integrity and protecting investors. He stated that the FCA would hold sponsor firms accountable for failing to meet required standards.
Cenkos, an AIM-quoted company providing securities-related services, failed to implement adequate oversight and supervision of its Sponsor Services. This failure was evident during a client’s attempted transfer from AIM to a Premium Listing. Cenkos did not manage key risks properly, nor did it conduct adequate due diligence to ensure accurate and complete communication with the FCA. The firm also failed to address concerns raised by the FCA regarding the client’s eligibility and the impact of a negative research report on the transaction.
The FCA noted that Cenkos’ failures included submitting several drafts of the client’s prospectus and eligibility letters without establishing the client’s eligibility for a Premium Listing. This oversight ultimately led to the transaction’s abandonment.
Cenkos agreed to settle at an early stage of the investigation, qualifying for a 30% discount on the fine, which would have otherwise been £757,800.
Key Takeaways for Other Firms:
- Implement Robust Systems and Controls: Ensure comprehensive oversight and supervision of all sponsor services.
- Conduct Thorough Due Diligence: Verify client eligibility and manage key risks diligently.
- Accurate Communication: Provide complete and accurate information to regulatory authorities.
- Address Regulatory Concerns Promptly: Respond to and address any concerns raised by regulators to avoid jeopardising transactions.
In conclusion, the case highlights the crucial role of sponsor firms in upholding market integrity and investor protection. Firms must adhere to high standards of diligence and professional care to avoid significant penalties and reputational damage.
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