FSA warns retailers not to breach rules over trading news

The Financial Services Authority has written to the company secretaries of all retailers in the FTSE 350, warning them to be careful how their firms release information about their trading fortunes this Christmas, in a pre-emptive bid to prevent any breaches of the listing rules.

The letter - sent earlier this month, but made public only yesterday - reminds companies of the relevant section of the regulations, which stipulate that a quoted firm must make a formal stock exchange announcement if there is a material change in its trading fortunes.

"The UK Listing Authority recognises that trading performance over the Christmas and New Year period is particularly important for retail companies and that increased speculation concerning trading is seen in the media," the letter reads. "We therefore feel it may be helpful to remind such companies of the need to ensure compliance with the continuing obligations under the UK Listing Authority's Listing Rules at this time."

It emphasises that, contrary to popular belief, there is no "10 per cent rule", which allows companies to only make a statement if they believe the information would move their share price by more than 10 per cent.

The letter comes just a day after the FSA announced that it would not be taking any action against J Sainsbury, the supermarket chain, for a breach of the listing rules earlier this year.

Sainsbury slipped up after informing an analyst that his profit forecasts for the group were too high, without making a formal announcement to the market. Suspicion was also raised when the group's house broker suddenly made dramatic cuts to his forecasts unprompted.

It is believed that although Sainsbury's actions amount to a technical breach of the rules, the FSA was convinced that it was a genuine error, and decided not to take the company into enforcement.

Two annalysts from Merrill Lynch were suspended over the publication of a note on Sainsbury although they were laater cleared to return to work.

Shares in retailers will be some of the most keenly watched in January.