Tejoori Limited, a self-managed closed-ended investment company, was fined after the FCA found it had failed to disclose essential inside information about one of its key investments, BEKON Holding AG, in 2016.
The failure led to market speculation and “prevented investors from making fully informed investment decisions”, the FCA said.
In July 2016, Tejoori was informed by BEKON about a compulsory acquisition of its shares by Eggersmann Gruppe, an acquisition that meant Tejoori also had to sell its shares in the firm under a share purchase agreement (SPA).
Tejoori, which first listed on the alternative investment market (Aim) in March 2006, did not inform shareholders or the public about the sale despite it being classed as inside information.
Under market abuse regulation introduced in early 2016, firms are required to share important, market-moving news as soon as possible.
The FCA found there had been “a misunderstanding of the legal effect of the SPA”, which meant Tejoori did not understand it had in fact sold its entire holding.
The Tejoori company share price rose 38% over just two days after investors heard of the Eggersman buy-out of BEKON, not realising Tejoori had already had sold its £3.5m shares.
The market speculated on online bulletin boards that the news would be good for Tejoori’s investment.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Tejoori’s failure to promptly disclose inside information misled the market in Tejoori’s shares and prevented investors from making fully informed investment decisions.
“This was a serious breach. Issuers must have regard to their disclosure obligations at all times and misunderstanding the commercial reality of a transaction is no excuse.”
The failure came to light after the London Stock Exchange queried the quick rise in share price with Tejoori in August, however the company did not understand that the SPA it signed meant it had sold its shares in BEKON.
It was only after Tejoori’s German legal adviser informed its adviser, Nomad, that it had indeed sold its BEKON holding that Tejoori issued a statement.
Its share price fell 13% on the day of the announcement.
The company cancelled its admission to trading on Aim on 5 December this year and co-operated fully with the FCA investigation, settling at an early stage in order to secure a 30% discount on the final fine which would have otherwise been £100,000.
