Angry Abbey ditches broker
Tuesday 13 June 1995
Abbey Life, one of the country's largest life funds, has suspended dealing in UK equities with Smith New Court, the stockbrokers, until the end of the year.
Abbey's decision comes because of its displeasure with Smith New Court in its role as brokers to the disastrous flotation of Aerostructures Hamble, the aerospace company chaired by Lord King.
Aerostructures put out a profits warning just 15 weeks after its flotation last year and Abbey has been pressing NM Rothschild, the banking advisers to the issue, to get hold of a report prepared by solicitors Dibb Lupton Broomhead and accountants Coopers and Lybrand about the events leading to the profits warning announcement.
"As brokers to the issue, Smith New Court have a responsibility to ensure the fullest information is forthcoming to shareholders," says David Bruce, deputy managing director of Abbey Life Investment Services. "As our agents, I feel they should have been more publicly on our side."
A source close to NM Rothschild said three separate regulatory agencies - the Stock Exchange, the Bank of England and the Securities and Futures Association - had looked into the circumstances leading to the profits warning and concluded nothing had taken place to warrant action against any of the advisers to the issue or any of the company's directors.
"We do not believe it would be appropriate to furnish some shareholders with documents and not others - and we believe that furnishing all shareholders with the documents, which is the only alternative, would jeopardise the commercial position of the company," wrote NM Rothschild to a shareholder.
Mr Bruce, however, is not satisfied with the amount of information shareholders have had access to. He says that Abbey Life, which has pounds 1.5bn invested in UK equities, will suspend dealing with Smith New Court in UK equities (it still deals with the firm in other markets) until the end of the year. "We may add them back to our lists," he says. "We're always reluctant to cut a broker off our list but in reality, it's our only sanction."
Smith New Court, announcing full-year results later this Thursday, is expected to report a sizeable fall in profits. Ken Taylor, Smith's managing director, said he was unable to comment about a relationship with one of the firm's clients.
Aerostructures' shares were floated at 120p. They are now trading at between 24-27p.
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