The City regulator bared its teeth yesterday, showing that companies listed on the London stock market can expect much larger fines for breaking its rules.
The Financial Services Authority, which next month hands over its powers to the Financial Conduct Authority, fined the oil services group Lamprell £2.4m for failing to keep investors informed ahead of a profits warning which wiped 57 per cent off its share price.
The fine dwarfs previous penalties for similar offences, with Photo-Me fined £500,000 in 2009, JJB Sports £455,000 in 2011 and Wolfson Electronics £140,000 in 2009.
The fine is the first imposed under the regulator's new regime, which is based on a quoted company's market capitalisation.
The FSA said: "This is expected to lead to significantly higher penalties than in the past."
Lamprell's financial position began to deteriorate rapidly from early in 2012 as projects fell behind budget and it employed too many contract staff on one major scheme.
But it continued to issue upbeat messages to the stock market. These included:
* 26 March 2012: "The board remains optimistic that the long-term prospects of the group continue to be promising";
* 25 April: "This is another significant contract award, demonstrating the health of the market for jack-up rigs";
* 1 May: "This further evidences the sustained demand for these rigs and the confidence in Lamprell's ability to deliver."
But on 16 May the company issued its profits warning and the shares collapsed.
The FSA said that monthly reports to the board had been totally inadequate for a company of its size and that such reports were delivered late.
It also said the takeover of a rival in 2011, which doubled Lamprell's size, had left the company using too many different reporting systems.
Tracey McDermott, the FSA's director of enforcement and financial crime, said: "Lamprell's systems and controls may have been adequate at an earlier stage, but failed to keep pace with its growth.
"As a result they were seriously deficient for a listed company of its size and complexity, meaning it was unable to update the market on crucial financial information in a timely manner."
It is understood that the FSA is not pursuing any individuals at the company or its financial advisers.
John Kennedy, the chairman of Lamprell, said: "The board recognised that it was in the best interests of the company to accept the position reached with the FSA, so as to avoid incurring significant additional expenses and expending the further time that would be required to pursue the matter."