The first ever custodial sentences for issuing false information to the market were recently given to two directors of a software company which released a misleading trading statement.
Directors Gareth Bailey and Carl Rigby, formerly directors of AIT Group plc, were jailed for 2 years and 3 ½ years respectively following an investigation by the Financial Services Authority (FSA). They were also disqualified from acting as directors for 4 and 6 years respectively.
The Financial Services Act makes it an offence to make a statement that is intended to make someone buy or sell shares, if the statement is false, misleading or deceptive. They were acquitted on charges of dishonestly misleading the market, but the Act makes it an offence to make such a statement recklessly and it was on that ground that the conviction was obtained.
This case has important implications for directors of listed companies, namely that the regulators will prosecute to the fullest extent that the circumstances permit. Directors who think they can take a casual approach to their duties of disclosure or who fail to stand up to a dominant figure and allow their names to be attached to a misleading statement made to the market, may regret their decision.
Directors Jailed Over inaccurate Information
If your company has corporate governance issues, or you are unsure of your responsibilities as a director, contact me for advice.
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