The Financial services Authority yesterday said it was investigating allegations that Boots, the high street retailer, allowed details of a trading update to leak before a formal statement from the company.
The regulator said it was aware of the allegations, made by a leading retail analyst during a conference call with the FTSE 100 company, and would be looking into them.
Friday's trading statement detailed a £390m investment programme, which the company warned would hit profits. The shares had fallen 3.1 per cent during the week. People selling shares in the run-up to the announcement would have avoided the subsequent 13 per cent decline in the share price that occurred on Friday when the company went public with the details of its investment programme. The programme is aimed at modernising its stores.
A spokesman for the FSA said: "We have seen the allegations and in the context of our monitoring of the markets these are the sorts of things that we will look at or deal with."
A report in last weekend's Sunday Telegraph mentioned a Cazenove research update, which was circulating before the Boots statement, that predicted parts of the company's trading statement. It is understood that Cazenove has now carried out its own internal review of the research and has given its conduct a clean bill of health.
The allegations that Boots had allowed a false market in its shares to develop because of price-sensitive leaks were made by Scott Ransley during a Friday morning conference call with Richard Baker, the chief executive of Boots, and Howard Dodd, the company's finance director. A recording of the conference call was made available for seven days.
Mr Ransley said: "I am sure half the people on this conference call know that one of your brokers was talking a story of a substantial increased investment programme at least in the week ahead of the statement. Can I just ask directors to do their utmost to prevent a false market developing in future?"
The Boots directors hit back, claiming that Merrill Lynch, the company's broker, had not leaked any information. Mr Ransley replied: "Then someone else has a good inside track on the company."
Some analysts suggested that Mr Ransley's comments were made in a fit of pique, having seen rival research that was more detailed than his own.
Mr Ransley was on holiday yesterday, having taken the week off. However, when contacted by The Independent he played down the significance of his remarks to Boots. "I don't think we are taking it as seriously as you guys are. It's not something that has been an issue for us. No one has contacted me about it," he said.
However other analysts on the same conference call also questioned elements of the way Boots had been communicating with the market. Bruce Hubbard, at Citigroup, questioned whether Boots stood by a statement it made in January, when it denied newspaper reports that quoted an unnamed Boots director as saying that modernising the business would come at the price of "two years flat or falling profits".
Mr Dodd told Friday's conference call that Boots stood by its earlier denial, saying that the company would begin to see profits growth in the financial year 2005-2006. "Our expectations are that in 2005/06 will have profits growth coming through."
Last night a spokesman for Boots said: "We categorically deny any wrongdoing. The company has not leaked any information."Reuse content