Former B&B FD fined for rights issue failings

The FCA said that in the lead up to the B&B’s 2008 rights issue Willford had failed to provide the board with information regarding profits, mortgage arrears and re-possessions,

On 16 May 2008, Willford received information that suggested that B&B’s financial outlook might be weaker than expected.

As B&B was preparing to raise capital through a rights issue, this should have immediately been raised with B&B’s board and investigated to ensure that the information provided to shareholders about the rights issue on 19 May was correct.

Tracey McDermott, the FCA’s director of financial crime and enforcement, said: “Willford failed to identify and investigate potentially material risks, or alert the board, at a crucial time for the firm.

“His conduct fell short of the FCA’s standards – senior managers should expect the FCA to take action if they fail to show due skill, care and diligence.”

The information Willford received was out of kilter with previous forecasts, and showed that bad mortgage debts (impairments), arrears and repossessions had all risen, whilst the difference between the interest rates B&B charged to, and received from, its customers (net interest margin) had fallen.

This is particularly significant as it suggested B&B could have fallen short of forecast profit for the year.

The FCA seeks to ensure market integrity and appropriate consumer protection. As the finance director, Willford was responsible for escalating and investigating these issues and ensuring material provided to shareholders on B&B’s financial position was correct.

The FCA did not find that Willford’s conduct caused the failure of the rights issue, or B&B’s subsequent nationalisation.

The size of the fine reflects the length and timing of the misconduct, which took place over three days during the height of the financial crisis.