A True and Factual Account of Fraud and Corruption
The Financial Conduct Authority's own published objective is "to protect and enhance the integrity of the UK financial system, and to make sure that markets are effective, efficient and reliable" Our group sent the FCA a 98-page report on our research findings of what happened at Yell/Hibu in early 2014. However, even at this early stage we felt that our submission to the Financial Conduct Authority would not gain much traction. The FCA had only been in existence as that entity for around nine months, previously known as the Financial Services Authority before changing to the FCA in April 2013.
The Hibu Chairman, Bob Wigley was on the FSA’s Senior Practitioners Panel and was the FSA’s nominated representative on the Council of European Securities Regulators Market Consultation Panel, therefore Wigley had strong connections with the current FCA. Moreover, a colleague and close acquaintance of Wigley, John Griffiths-Jones was a Director and Deputy Chairman of the Financial Services Authority from 2012 to 2013, and Between April 2013 and April 2018 he served as the chairman of the Financial Conduct Authority.
We knew then we had another challenge.....
The FCA, unsurprisingly, found no wrongdoing from the information we provided, this is despite us pointing out where we met their criteria for an investigation on every single point (this is detailed below). Furthermore, when we asked them to raise a complaint into the investigation they simply investigated themselves, and lo and behold they could find nothing wrong there either..
On the 25th March 2015, we sent a information request to the FCA under the Freedom of Information Act which requested...
"Please advise on how many occasions and in what capacity did the FCA have any contact with Mr. Robert Charles Wigley aka Bob Wigley between Monday 01 July 2013 and Friday 21 March 2014."
The FCA confirmed that there had been no contact, however, they confirmed that a total of EIGHT communications had been made between the representatives of Hibu PLC and its Directors to the FCA.
"We have investigated whether there was an acceptable level of customer services demonstrated by the Authority and whether the correct processes were followed. We have found no evidence to substantiate any of the allegations made; therefore, this complaint is not upheld."
The Financial Conduct Authority state that they are bound by the Financial Services and Markets Act (2000). They confirmed that they do not believe that these were breached.
The FSMA (2000) act lists five types of behaviour (with an additional two that relate to false trades) that are set out in FSMA as amounting to market abuse. Let's examine those five elements.
Insider dealing – when an insider deals, or tries to deal, on the basis of inside information.
Insider dealing is abundantly evident in this case. When the markets were informed that there would be "little or no value" in the company's shares, everyone of the institutional holders had already sold their entire holdings, leaving retail and private investors holding all the worthless stock.
Invesco Fund Manager, Neil Woodford held approximately 24% of the issued shares in Yell/Hibu one year before delisting. Woodford had commented on 14 November 2011 - "Yell's new strategy offers real opportunity for value. Yell is building a unique position in the online market, with real potential for growth and cash generation." Yet, less than a year later, Woodford sold his entire holding in hibu at a loss of at least £75 million, netting proceeds somewhere in the region of £5 million (or 1p per share).
Furthermore, investor relations constantly contradicted themselves when asked by shareholders how many shares Chairman Bob Wigley held. Their responses ranged from "We don't know", to 500,000 shares, to 3.1 million shares. However, on delisting, we obtained the share register, and even though Wigley held the shares in his own name (rather than through a nominee) on the final day listing he held no shares. This disposal was NOT communicated to the market.
Improper disclosure – where an insider improperly discloses inside information to another person.
This is really a continuation of element one, disclosure MUST have been made to institutions, as at the time of the announcement of "little or no value" hibu PLC was the only company in the top 500 companies listed on the London Stock Exchange to have NO institutional investors. It is beyond coincidence that all of these institutional investors and funds had sold their entire holdings to retail investors without having some form of information that was passed on to them by an insider at the hibu Group of Companies, or by someone who stood to gain from these shares being held by retail investors only.
The $15 billion New York hedge fund, Tiger Global, was the beneficial entity behind a fund called Fresco SRL, and appears to have been far more certain than the rest of the market about the eventual outcome of the restructuring, having amassed a 12.17% ‘short’ holding in hibu by 1 November 2012.
12.17% of hibu shares was about 280 million shares, and ‘shorting’ of course carries with it almost unlimited risk. A favourable announcement (for example that shareholders were to retain some stake in the company after all the restructuring options had been reviewed) would have seen the share price rise rapidly and significantly, making it extremely expensive for Fresco to close their shorts.
hSG considers it a reasonable conclusion that Tiger Global was somehow convinced that this would not happen.
Misuse of information – behaviour based on information that is not generally available but would affect an investor’s decision about the terms on which to deal, and where the behaviour would be considered by market participants to be below the standard expected of a user of the market.
Shareholders were denied access to company accounts for approximately 20 months before the shares were delisted. Shareholders were in effect to be denied any information which might throw into question the restructuring option that had been chosen, and were simply expected to accept that there would be no payment whatsoever to them while ownership of the company was passed to the Lenders.
Audited accounts would have gone at least some way towards answering shareholder questions. However, the movement of the accounting reference date to 30 September 2013 and then putting hibu plc into administration on 27 November 2013 (Wigley: “a planned step in the restructuring process”) meant that hibu had managed to avoid their figures being challenged at any time since the Annual Financial report of May 2012 was issued.
It is a flagrant abuse of the authority vested in Directors of a publicly-quoted company for them to take steps to prevent scrutiny of their actions, including the unexplained write off of £3.5 billion worth of assets, and the incomprehensible purchase of shares in its own subsidiary for over £1 Billion. Such actions are a serious violation of the 2006 Companies Act.
Dissemination – giving out information that conveys a false or misleading impression about an investment or the issuer of an investment where the person doing this knows the information to be false or misleading.
Distortion and misleading behaviour – behaviour that is likely to give a false or misleading impression of either the supply of, or demand for, an investment; or behaviour that would be regarded, or would be likely to be regarded as behaviour that would distort or would be likely to distort the market in an investment.
These two elements are a huge and important part of our claim for wrongdoing to be investigated by the FCA. For full details please see the Withholding / Dissembling Important Information pages in our Evidence section.
Just a small selection of evidence for elements Four and Five;
As with the Serious Fraud Office, the Financial Conduct Authority appeared to do everything it could NOT to launch an investigation, mainly citing those acts of parliament and company law that fell outside their official remit. HSG however, provided many pages of documentation stating where the law had been broken, and why it was the FCA's job to hold an investigation. Again, as with the Serious Fraud Office, they declined to interact with us further once they had "investigated" themselves.
Given the close proximity to the FCA of Hibu Chairman Bob Wigley, in his previous roles at the authority and his close acquaintance with the Director of the FCA, it can only be assumed that there was a SERIOUS conflict of interest that prevented the correct route of investigation taking place.
There is a further conflict of interest in that the Director of Enforcement and Financial Crime and the Financial Conduct Authority was Tracey McDermott, who later went on to become CEO of the Authority. McDermott now sits on the Board of UK Finance, which is chaired by, yes, you guessed it, Bob Wigley.