Cenkos, has been fined £535,500 by the UK’s markets watchdog over its sponsorship of Quindell, the scandal-hit insurance claims processor and legal services company that became Watchstone.
Cenkos was penalised by the Financial Conduct Authority for sloppy systems and controls around its sponsor services. In particular, the FCA took issue with
- Cenkos telling the regulator that one of its clients was eligible for a Premium Listing when it had not done enough research to ensure this was the case — a key element of a sponsor’s role.
While the FCA did not name Quindell, Cenkos confirmed the client in a statement on Tuesday.
Cenkos said in a statement in July (26th):
The Company notes the recent press speculation that it is subject to an investigation by the Financial Conduct Authority (“FCA”) into its work advising Quindell plc (now known as Watchstone Group plc) on its planned move to the main market of the LSE in 2014.
The Company can confirm that there is an FCA investigation in progress but no further details can be provided until the FCA have concluded their investigation.
Cenkos advised Quindell on its failed attempt to move from the Alternative Investment Market to London’s main list in mid-2014.
Quindell withdrew its application after the FCA made it clear the company would fail listing requirements.
Leading up to that,
- Quindell was targeted by Gotham City Research, the short sellers, which produced a scathing report on the company’s accounts.
- This, together with a series of contentious trades by Rob Terry, the group’s founder, dented investor confidence in the company, whose tentacles reached from legal services to insurance to software, and whose market capitalisation once reached £2.7bn.
Cenkos
- “failed to consider the potential impact of a negative research piece” by Gotham on the timing of the planned move to the main list, and how it might cause any investor detriment, the FCA said.
The FCA’s determination may provide some satisfaction to Gotham, which was sued by Quindell for libel.
Quindell said a judgment was given in its favour after Gotham failed to acknowledge the proceedings or provide a defence.
Cenkos, Quindell’s house broker, had forecast that the company would make about £300m in pre-tax profit in 2014. A year ago, Quindell revealed a post-tax loss of about £350m.
- “Sponsor firms have key gatekeeper functions to ensure a candidate for listing is eligible and so they must carry out appropriate due diligence to the requisite standards,” said Mark Steward, the FCA’s director of enforcement.
- “The FCA will hold sponsor firms strictly accountable whenever these standards are not met given failure places both market integrity and the wellbeing of the investing public at risk.”
Cenkos said it had co-operated with the watchdog’s probe and, since 2014, had put in place an “extensive” remediation programme, including appointing a head and deputy to oversee sponsor services.
Mr Terry was forced out as Quindell chairman in November 2014. A new management team restructured the business and renamed it Watchstone.
Other investigations?
- Quindell remains under a year-long criminal investigation by the Serious Fraud Office after it took over the FCA’s regulatory probe.
- KPMG, which acted as Quindell’s auditor, is under review by the accounting watchdog, along with RSM Tenon, its predecessor as auditor.
- Last year, Cenkos clarified that it was not being investigated by the SFO.
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