Three former directors of the doorstep lender Cattles and its subsidiary Welcome Financial Services have been fined a total of £600,000 by the Financial Services Authority and banned from working in the finance industry for life.
James Corr, Cattles' finance director, has been fined £400,000, Peter Miller, Welcome's finance director, has been fined £200,000, and John Blake, Welcome's managing director, was fined £100,000. Mr Blake is appealing against the ruling.
The subprime loans outfit Cattles virtually collapsed in 2009 and shareholders saw nearly all their value wiped out from what had been a FTSE 250 company.
The FSA said that the men had been responsible for misleading information in Cattles' annual report and rights issue documents. These stated that loans of customers that had fallen into arrears totalled only £900m of the Welcome loan book. The true number was £1.5bn.
Cattles also announced a pre-tax profit of £165.2m for 2007, but if accounting standards had been correctly applied Cattles would have suffered a pre-tax loss of £96.5m.
Shareholders, including those who paid 128p a share in the rights issue, ended with just 1p a share when the company finally left the stock market. The FSA publicly censured Cattles and Welcome, and said it would have imposed substantial financial penalties on them had it not been for their financial circumstances. It did not say what the fines would have been had the men been wealthier.
Tracey McDermott, the FSA's acting director of enforcement and financial crime, said: "The consequences for shareholders of the misleading statements issued by Cattles and Welcome have been devastating. These directors failed to act with integrity in discharging their responsibilities. They failed in their obligations to shareholders, the wider market and the regulator."
At the time of the rights issue, Cattles' auditors were PricewaterhouseCoopers, according to documents from the time. Lazard was the sole sponsor and Citigroup and HSBC were underwriters.
The FSA said: "It is likely that investors would have regarded this [misleading information] as highly material when subscribing under the rights issue."Reuse content