UK regulator censures Aviva over choice share debacle

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The UK monetary regulator has given insurance coverage firm Aviva a slap on the wrist over its conduct two years in the past when it was pondering of cancelling its choice shares.

The Monetary Conduct Authority mentioned on Monday that Aviva “failed to think about correctly its obligations” when making bulletins about its plan, though it stopped in need of fining the corporate.

Homeowners of the insurer’s choice shares had been outraged in March 2018 when the corporate raised the likelihood that it might cancel the shares at par worth, which was under the place they had been buying and selling. The announcement took the market without warning, and drove the value of the choice shares down between 20 per cent and 26 per cent.

Traders threatened authorized motion and parliament’s Treasury choose committee requested the FCA to look into the problem.

“Aviva failed to think about adequately how the announcement may be interpreted by the market, particularly the holders of the choice shares,” the FCA mentioned in a press release.

It added: “Aviva knew {that a} important proportion of the choice shareholders had been retail traders, however it didn’t clarify that it had made no resolution to cancel the choice shares.”

Aviva’s £450m of choice shares carry a coupon of 8-9 per cent and rank above unusual share dividends by way of precedence. They’re an costly type of funding for Aviva.

The controversy pressured the corporate to make clear that it was not going to cancel the shares, and it additionally arrange a £14m compensation scheme for traders who had misplaced cash due to the autumn within the share worth after the preliminary announcement.

Aviva has accepted the FCA’s censure over the problem. In a press release, the corporate mentioned: “This was a disappointing episode for which we’re sorry and classes have been discovered.”

It added: “We recognise the uncertainty created for choice shareholders two years in the past while we had been contemplating our choices and we subsequently made discretionary goodwill funds to impacted choice shareholders.”

Aviva’s shares rose virtually three per cent on Monday.

Because the choice share scandal, the corporate has modified its chairman, chief govt and finance director.

Amanda Blanc grew to become chief govt earlier this yr and has promised to focus the enterprise on its operations within the UK, Eire and Canada. She has already offered the Singapore enterprise and a number of the continental European operations, comparable to these in France or Italy, may very well be subsequent to go.

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