FCA enforcement action – non-executive Chair fined for disclosing inside information

The Financial Conduct Authority (FCA) has fined Sir Christopher Gent (SCG), the former non-executive Chair of ConvaTec Group Plc, £80,000 for unlawfully disclosing inside information in breach of Article 14(c) of the (then) EU Market Abuse Regulation.

The fine follows a warning notice issued to SCG in September 2021 by the FCA proposing to take action against him – neither his name, nor the company name, was published at that time. A warning notice is not a final decision of the FCA – an individual has a right to make representations before the FCA decides to issue a decision notice.

 The FCA found that:

• acting in his capacity as a member of the board, SCG disclosed inside information relating to the revision of financial guidance and the CEO's retirement to two of ConvaTec’s major shareholders before this information had been announced to the market.
• given his training and experience, SCG should have realised that the information he disclosed was, or may have been, inside information and that it was not within the normal exercise of his employment to disclose it.
• the disclosures cannot properly be regarded as part of permitted discussions of a general nature regarding the company’s business and market developments between its management and its shareholders.
• SCG acted negligently in disclosing the information, notwithstanding that:
• • ConvaTec had not formally classified either piece of information as inside information at the time he disclosed it;
  • there were confidentiality obligations imposed on one of the shareholders under a relationship agreement;
  • SCG understood that ConvaTec’s brokers had advised that the financial guidance information was not sufficiently precise at that time to require a market announcement; and
  • the executive director responsible for giving ConvaTec legal advice and overseeing its compliance with the market abuse regime and one of ConvaTec's brokers knew of SCG's plans to call the shareholders and convey the information.
• there is no evidence that SCG traded on the information or that he intended to make personal gain, or avoid loss, from making the disclosures.

We discuss the decision in more detail and consider the lessons to be learnt from it in our briefing.