22 Mar 2015

Reckitt fined for Listing Rules and DTR failures

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Reckitt Benckiser (RB), the makers of Cillit Bang, Dettol and Nurofen have been fined more than half a million pounds by the FCA for breaches of the Listing Rules and Disclosure and Transparency Rules (DTRs) and for a failure to identify breaches of the Model Code relating to share dealings by two of its directors.

What happened?
RB had in place a share dealing policy that required, among other things, that its persons discharging managerial responsibility (PDMRs) complete an "Intention to Deal" form to request dealing pre-clearance for consideration by the company secretary and the CEO and to notify the company within four days of dealing that dealing had taken place.

RB did not, however, regularly review the appropriateness of its share dealing policy, strictly enforce the pre-clearance process contained therein or provide training on the share dealing policy, the Model Code or the DTRs to its PDMRs. Instead, RB relied on its annual self-certification process and the knowledge and experience of its PDMRs to comply with the Model Code and enable it, in turn, to comply with its regulatory obligations under the Listing Rules.

When RB became aware of dealing by two of its PDMRs which was in breach of the share dealing policy and Model Code, it immediately notified the UK Listing Authority of the breach but did not notify the market of the dealing within the timeframe required under the DTRs nor did the notification contain the required information.

What the FCA thought of that...
The FCA found that, notwithstanding the existence of the share dealing policy, RB had inadequate systems and controls for monitoring share dealing by its PDMRs in its own shares leading to breaches of the DTRs and the Listing Rules. In particular the FCA noted that:

  • RB's systems and controls did not enable it to monitor all share dealings by its PDMRs effectively or to identify potential or actual breaches of its share dealing policy and the Model Code and hence failed to detect breaches in a timely manner;
  • RB failed to review its share dealing policy to identify or mitigate certain risks;
  • RB assumed its PDMRs had a knowledge and familiarity with the Model Code and the DTRs;
  • RB failed to give regular or structured training or reminders (except in advance of close periods and as part of its annual certification process);
  • in practice, RB used an informal process for dealing clearance to deal and failed to keep adequate records;
  • when RB became aware of the dealing by the two PDMRs it did not notify the market within the required timeframe; and
  • the notifications to the marked did not contain all the required information such as the dates of the transactions.

RB chose to settle with the FCA at an early stage of the investigation which qualified it for a 30% discount from the maximum financial penalty of £771,190.

What can you do to avoid being at risk?
There are a number of practicable safeguards a company can put in place to avoid breaching the Listing Rules and DTRs including:

  • instigate a mandatory training programme for the PDMRs;
  • ensure that there is a clear share dealing policy in place and that it is complied with on an ongoing basis;
  • have regular reviews of the share dealing policy and training programme to ensure that they are kept up to date;
  • regularly and frequently remind the PDMRs in relation to compliance with the Model Code and DTRs;
  • keep good records of all requests and dealings; and
  • ensure the PDMRs are reminded that they need to speak to the company secretary (or other appropriate persons) before dealing.

Please contact us if you would like to arrange either a review of your share dealing procedures or staff training.

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Guy Morgan

Guy Morgan
Senior associate

T:  +44 20 7809 2505 M:  Email Guy | Vcard Office:  London

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