The Financial Services Authority is investigating trading in Amvescap shares over a three-hour period on Tuesday when details of a secret boardroom memo were circulating in the City.
The document, which was emailed by mistake to 50 investors and analysts, showed the fund management group was falling short of its internal targets and readying itself to absorb a $300m fine over the market timing scandal in the US.
The damaging financial details spread like wildfire among traders, leading to the heaviest turnover in Amvescap shares for more than a decade, and forcing the company to publish the memo on its website. Amvescap shares had plunged 8 per cent at one point.
The FSA, which is headed by John Tiner, is to examine trading records at the banks where the rogue email was received. A spokesman for the regulator said: "Many companies appear to have acted properly and not traded on the basis of the information that was released by mistake. We will clearly be looking at the other trading that took place."
The FSA enforces a code of conduct which bans dealing on the back of information that is "relevant and not generally available". It has the power to issue unlimited fines in market abuse cases. Investment banks' compliance procedures are also likely to come under the regulator's spotlight. Legal advisers inside the major investment banks banned recipients of the document from speaking to clients, but one recipient said: "It took about 20 minutes to get clamped, and there was certainly a false market in the stock."
The document was eventually published on the Amvescap website three hours after a long-standing secretary in the London head office accidentally appended it to the first-quarter results. The débâcle is being treated by Amvescap and the FSA as human error and no action will be taken against her. However, the company is to stop sending email copies of results to London investors and analysts, and will switch to its US practice of emailing only links to its website.
Amvescap shares were down another 8.5p to 377.5p yesterday as the company struggled to limit the damage. The forecasts in the document - which are up to 15 per cent below the market's current expectations for the company - were incomplete and subject to change, Amvescap said. In particular, the company was seeking to play down suggestions that the $300m exceptional charge, mooted in a discussion of the company's debt covenants, was its expectation of the size of a settlement of the market timing abuse investigation by the New York attorney general Eliot Spitzer.
One analyst said: "They have shot themselves in the foot spectacularly. They have effectively told Mr Spitzer that he can throw $300m at them without damaging the business, so you can bet he is now going to throw $300m at them."Reuse content