RegulationPractice RegulationFSA blasts BDO for takeover sponsorship failings

FSA blasts BDO for takeover sponsorship failings

Firm chastised for its part in proposed takeover after trying to avoid reverse transaction

BDO HAS BEEN blasted by the Financial Services Authority for shortcomings in its sponsorship of Shore Capital’s proposed takeover of Puma, in the first public censure of its kind.

The size of Shore Capital’s intended target meant the deal could constitute a reverse takeover, which would ordinarily require a company’s shares to be temporarily suspended to avoid shocks to the market.

Despite this, BDO attempted to avoid classifying the transaction as reverse, despite acknowledging at the time that the ploy had little chance of success. It also agreed with Shore Capital to delay contacting the UK Listing Authority until after the announcement, thereby potentially avoiding share suspension.

Marc Teasdale, UKLA head of department, said: “Sponsors…are entrusted to provide sound and expert guidance to issuers on their obligations and are relied upon to be open with the UKLA. BDO failed in its responsibilities…and we are sending a clear message with this public censure about the importance we attach to the sponsor role.”

BDO and the former partner responsible for the deal cooperated with the FSA’s investigation and accepted its decision; the firm has made operational changes in response to the case, including establishing a Corporate Finance Public Risk Committee and giving refresher training to partners and directors.

Head of advisory services Gervase MacGregor said: “BDO takes its regulatory responsibilities extremely seriously, and I am confident these changes will ensure all future corporate finance work reaches BDO’s high standards without exception.”

The FSA has no powers to fine a sponsor but it may refuse or cancel approval to act as one.

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