MyTravel to appeal against FSA fine for market abuse
Saturday 27 November 2004
Mytravel clashed with the City's top watchdog yesterday after it vowed to appeal against an unquantified fine levied against it for allegedly misleading the stock market more than two years ago.
Less than 48 hours after the holiday company got the green light for a controversial debt restructuring, it revealed that the Financial Services Authority had imposed a "financial penalty" for breaking the Listing Rules between July and October 2002.
MyTravel issued a swift rebuttal, rejecting the FSA's allegations, made on 4 November this year. It plans to appeal. It will contest the penalty, which is thought to be significant, at a hearing with the Financial Services and Markets Tribunal.
The fine is understood to relate to an investor briefing given to analysts in July 2002 by Tim Byrne, the then chief executive. Mr Byrne, who was sacked three months later after presiding over one of the biggest accounting scandals in recent years, gave an upbeat assessment of the group's future, easing investors' fears that the company was heading for disaster.
The briefing, on 23 July, followed a profits warning in May 2002. Just two months later, another two profits warnings followed in quick succession, plunging the group into a crisis that almost cost it its future. At the time the group's then global development officer, Richard Carrick, said it was not being investigated by the FSA.
MyTravel's decision to appeal against the fine is the third high-profile objection that the FSA has faced in the past year. After fining Shell £17m over its oil reserves scandal, Philip Watts, its former chief executive, appealed against the FSA over an alleged breach of third party rights.
Legal & General has appealed against a £1.1m fine from the FSA relating to alleged endowment mis-selling, and the two parties are still waiting to hear the outcome of the hearing.
Appeals against an FSA fine are made to the Financial Services and Markets Tribunal, which was set up recently by the Government to hear challenges to the regulator's decisions. The cases are in fact de novo. This means the FSA has to prove its case against MyTravel again for the benefit of the appeal hearing.
MyTravel said it did not believe the FSA's move would have a "significant effect on the financial position of the company".
Separately, the company, which clashed with its bondholders in the High Court this week, attempted to paint an optimistic picture of trading. It said trading for its winter season was encouraging, as were early bookings for next summer. It has slashed capacity for both seasons to bring it into line with demand for brochure holidays.
It is expected to break even only at the operating level for the year to end-October and does not expect to make even an operating profit for at least the next two years.
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