Insurance giant Aviva has been censured for a statement it made in 2018 that confused investors and sent shares plunging.
The Financial Conduct Authority (FCA) said that Aviva had “failed to consider properly its obligations” to ensure that its public announcements do not mislead readers.
It said that Aviva had promptly clarified its statement, and helped affected investors, so will avoid a financial penalty from the City watchdog.
“This was a significant oversight by Aviva that confused the market for preference shares,” said Mark Steward, the FCA’s executive director of enforcement and market oversight.
“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 that Aviva made on March 8 2018 could give the impression that the business had decided to cancel its preference shares at below the then market value.
But, the FCA said, “Aviva made the announcement when it had, in fact, formed no intention to cancel the preference shares in question”.
It added: “The impression given by the announcement was not accurate.”
As a result of the announcement the value of preference shares dropped between 20% and 26%. Many of those who lost out were individual investors, not large institutional investors.
Aviva later clarified the statements, and refunded millions of pounds to the investors who were hit by the share price drop.
The FCA said that Aviva’s breach was “serious but not intentional”.
It added: “The FCA found that Aviva failed to consider properly its obligations under the rules to take reasonable care to ensure the announcement was not misleading.
“In particular, Aviva failed to consider adequately how the announcement might be interpreted by the market, especially the holders of the preference shares.”
Preference shares, or preferred stock, put investors first in line to get refunded from the company’s assets if it goes bust.
The firm said: “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.”