RiskTech Forum

Statement Re: Promotion Of Shares In EMMIT Plc

Posted: 3 November 2014  |  Source: FCA

The Financial Conduct Authority (FCA) has been made aware that individuals are being encouraged to transfer money from their work pension schemes into Self-Invested Personal Pensions (SIPPs) and use that money to buy shares in Emmit plc, a company admitted to trade on AIM, a market operated and regulated by the London Stock Exchange (LSE). Some investors are being offered “cash back” on their investments in Emmit plc, paid by a third party, as an incentive to do this.

The FCA has serious concerns that investors’ pensions are being put at risk. The FCA has reason to be concerned that:

    - Statements to the effect that this represents a good price for Emmit
      plc shares, because they normally sell at a much higher price; and/or
    - The offer of an immediate cash payment (of up to 30% of the
      transfer value of their pension) from a third party when
      they invest in Emmit plc shares;

Some investors appear to have invested 100% of their pension assets into Emmit plc shares and may suffer significant financial loss if they have done this without fully understanding what they are doing. Further, the cash incentive might amount to a withdrawal of assets from a pension scheme which could incur a significant tax liability on the investor.

To date at least 60-100 investors have invested in this scheme, and as much as £3m-£4m may have been invested by them.

Our review of trading in the shares of Emmit plc has shown that pension investors have constituted a significant proportion of the demand for the shares of Emmit plc, which may impact on the normal balance between supply and demand for these shares. Emmit plc shares were trading at 6p a share in December 2013, and at 97p when suspended by the London Stock Exchange last week (having risen to over 200p earlier in the year). Emmit plc’s market capitalisation is £17.8m. According to Emmit plc’s last unaudited interim accounts, Emmit plc’s liabilities exceeded its assets as at 30 June 2014.

In the past, the FCA has asked SIPP operators to be vigilant and do proper due diligence to assess higher risk and unusual investments. In this case, the FCA is grateful to have received proactive reports from a number of FCA authorised firms, which has helped us to bring this issue to the attention of investors.

We have taken action in this matter by publishing our concerns and liaising with the London Stock Exchange before our investigations are complete. The London Stock Exchange undertook a precautionary suspension of the trading of the shares in Emmit plc on 17 October 2014. If individuals or companies have further information about this matter, they should contact 0800 111 6768 (freephone), as should any individuals who have invested in Emmit plc shares and are concerned.

The FCA is not currently aware of any information that Emmit plc itself is complicit in the conduct set out above.