"Firms must ensure that announcements to the market are clear and not misleading. But for Aviva’s prompt clarification and the payment scheme, this case could have led to a financial penalty."
The announcement concerns Aviva's preliminary year-end results, published in March 2018. The FCA’s investigation found that the announcement gave the impression that Aviva intended to take action to cancel at par value certain preference shares (which had been described at the time of issue in the early 1990s as “irredeemable”).
At the time, the preference shares were trading above their par value and so the statement caused concern that holders would incur losses on cancellation. At the close of market on that day the market price for Aviva’s preference shares fell between 20% and 26% as holders took action to sell at the above par market price. Retail investors made up a significant proportion of the preference shareholders affected.
The FCA has found Aviva’s breach to be "serious but not intentional". It said Aviva failed to consider adequately how the announcement might be interpreted by the market, especially the holders of the preference shares.
The regulator concluded that Aviva made the announcement when it had, in fact, formed no intention to cancel the preference shares in question. Aviva clarified its intentions in a further regulatory announcement which expressly stated Aviva had decided to take no action to cancel the preference shares.
A week later, Aviva also established a payment scheme for preference shareholders who sold their shares over the period at a lower share price. This scheme was intended to put those shareholders in the same financial position they would have been in, had they sold their preference shares during this period.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “This was a significant oversight by Aviva that confused the market for preference shares. Firms must ensure that announcements to the market are clear and not misleading. But for Aviva’s prompt clarification and the payment scheme, this case could have led to a financial penalty.”
In a statement, Aviva said: "The Financial Conduct Authority has today published the outcome of its investigation into Aviva’s announcement on preference shares in March 2018. Aviva accepts this decision. This was a disappointing episode for which we are sorry and lessons have been learned. We recognise the uncertainty created for preference shareholders two years ago whilst we were considering our options and we subsequently made discretionary goodwill payments to impacted preference shareholders."
