By Andrew Lasky, Legal Product Specialist, Financial Recovery Technologies
Company Tesco PLC
Jurisdiction United Kingdom
Claims Breach of continuous disclosure obligations, and misleading and deceptive conduct
Relevant Period August 29, 2014 through September 22, 2014
Participation Deadline February 22, 2018
On March 28, 2017, it was announced that Tesco entered into material agreements with UK regulatory authorities in connection with past accounting practices at Tesco Stores Ltd, and the August 29, 2014 dissemination of overstated profit expectations by Tesco PLC. Under the terms of a deferred prosecution agreement with the UK Serious Fraud Office, Tesco Stores Ltd has agreed to pay a fine of GBP 129 million to settle allegations of false accounting from February-September 2014.
Separately, the Financial Conduct Authority (FCA) will forego imposing additional financial penalties on Tesco in exchange for the company’s participation in a recovery scheme designed to compensate for Tesco’s market abuse stemming from their dissemination of the Trade Update that regulators believe Tesco allegedly knew, or could reasonably have been expected to know, contained false or misleading information.
The FCA ordered the recovery mechanism (“Compensation Scheme”) pursuant to its authority under section 384 of the Financial Services Markets Act. This is the first time the FCA has used this provision to require a listed company to pay compensation for market abuse.
DETERMINING ELIGIBILITY & COSTS
The Compensation Scheme is limited to compensating investors for purchases of Tesco securities during the Relevant Period. Only “net purchasers” of Tesco shares and Tesco listed bonds are eligible to participate in the Compensation Scheme. To be considered a net purchaser, you must have purchased more shares than you sold during the Relevant Period. Investors that purchased shares outside of the Relevant Period are not eligible to participate, but may still pursue Tesco losses individually or in a separate group action.
Under the Compensation Scheme, Tesco will be required to pay full restitution to eligible purchasers of Tesco shares and bonds. The amount of restitution will equal overpayment for each security minus losses mitigated through sales or hedging. The FCA considers overpayment as the difference in price of Tesco securities between the close of trading on September 19, 2014 and the close of trading on September 22, 2014. Total compensation under the Compensation Scheme is expected to be approximately GBP 85 million.
FRT has issued the following alerts to FRT Global Group Litigation clients:
- Full Alert: April 29, 2017
- Update Alert: January 9, 2018
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