Censure for Teather & Greenwood after 'serious breach'

Teather & Greenwood, the quoted stockbroking business, has been publicly censured by the Takeover Panel after a "serious breach" of its rules. It is only the third time in the past two years the City watchdog has resorted to such an extreme punishment.

Teather & Greenwood, the quoted stockbroking business, has been publicly censured by the Takeover Panel after a "serious breach" of its rules. It is only the third time in the past two years the City watchdog has resorted to such an extreme punishment.

The panel issued a statement yesterday detailing breaches of the Takeover Code committed by Teather & Greenwood when it acted for Florissant, a company bidding for QXL, the online auction business, this year.

The panel more commonly admonishes City firms by private letter,which the guilty parties are expected to show to their insurers and the Financial Services Authority.

Public censure is one of the most serious actions the panel can take and threatens Teather & Greenwood with being shunned by other City counterparts.

The firm was found guilty of failure to make timely disclosures and for breaching the rules in the Takeover Code which are designed to make sure brokers' corporate-finance arms are separate from their share-trading arms during a bid.

Teather & Greenwood started acting as broker to Florissant on 9 February but it was not until 18 March that it informed the panel of this. During that time it should have also made public share trades its market-making desk executed but these went undisclosed.

Under Takeover Panel rules Teather & Greenwood's corporate finance advisers and clients are not supposed to trade shares in QXL through Teather & Greenwood's market-making desk. This is to ensure that a bidding company, for instance, does not abuse its adviser's market-making desk by using it to buy shares in a target company above an already stated offer price.

However, Teather & Greenwood breached this rule by buying shares from the market to sell to Florissant and in some cases at prices above its 1,400p offer.

The panel described how Teather & Greenwood bought shares three times after receiving orders from Florissant. On two of the occasions, it failed to satisfy the Florissant orders in full and as a result it had to sell QXL shares to Florissant that it did not own, compounding its rule breaches by going short.

To make matters worse, the stockbroker ultimately had to cover its short position in QXL shares by buying in the market at above Florissant's 1,400p offer.

But, the panel said it had received confirmation from Teather & Greenwood that there was no arrangement in place whereby the broker was compensated by Florissant for any loss.

A spokeswoman for Teather & Greenwood said: "We are aware a mistake has been made. We have subsequently reviewed and improved our procedures and we are confident it won't happen again."

The Panel's position on 'virtual' takeovers

The Takeover Panel yesterday moved to clarify the rules and regulations surrounding so-called "virtual" takeover bids that contain a number of preconditions which have to be met before any firm offer for a company materialises.

The panel issued the statement clarifying what potential bidders are required to say when making virtual bids but also how putative bidders must disclose conditions attaching to subsequent firm offers.

It said the panel must be consulted before a statement containing preconditions is made. Any statement must also state whether preconditions must be satisfied or are able to be waived. The statement must also include a prominent warning that the announcement does not amount to a firm intention to make an offer.

The panel stressed that firm offers should not be subject to conditions that depend solely on subjective judgements by directors of the bidding company. It said that in future it would be willing to consider special conditions negotiated between two parties to help create an environment conducive to deals being completed. However, the panel made clear it was wary of undermining the principle of certainty for shareholders once a firm offer had been made. Such an offer can be withdrawn only in the most exceptional circumstances, the panel said, apart from shareholder disapproval or regulatory intervention.