The UK's Financial Conduct Authority has today fined Tejoori Ltd for failing to inform the Alternative Investment Market of inside information as required by Article 17(1) of the European Union's Market Abuse Regulation - the first fine the regulator has levied for late disclosure.

MAR was introduced on 3 July 2016. Tejoori is a self-managed closed-ended investment company whose shares were traded on AIM between 24 March 2006 and 5 December 2017. Early last year, Tejoori had a shareholding in BEKON Holding and had valued it in its financial statements at US$3.35 million. On 12 July, BEKON notified Tejoori of a compulsory acquisition of its shares by Eggersmann Gruppe. The acquisition required Tejoori to sign a share purchase agreement and to sell its BEKON shares to Eggersmann for no initial consideration and with only a possibility of receiving deferred consideration that was much lower than the value of Tejoori’s investment in BEKON.

The information about the sale to Eggersman was inside information and, under MAR, Tejoori was required to disclose it as soon as possible. It did not do so, however.

Tejoori’s BEKON shares were ultimately transferred to Eggersmann on 10 August 2016 with both BEKON and Eggersmann issuing press releases about the acquisition the following day. The press releases made no reference to Tejoori, so the market was unaware of the terms, including the consideration paid to Tejoori by Eggersman.

Without knowing these details, the market speculated, in online bulletin boards, about the amount that may have been paid to Tejoori. The bulletin board discussions regarded the sale as positive development for Tejoori and Tejoori’s share price rose sharply on 22 and 23 August 2016, increasing 38% over the two days.

The London Stock Exchange contacted Tejoori’s nominated advisor on the morning of 23 August to query the sudden rise in price and Tejoori informed him that it did not hold any inside information and that it had not sold its shares in BEKON. This was based on a misunderstanding of the legal effect of the share purchase agreement. The Nomad only obtained clarification of the correct position when Tejoori’s German legal adviser subsequently informed the Nomad that Tejoori had indeed sold its BEKON shares.

Tejoori ultimately released an announcement on 24 August 2016 which confirmed that Tejoori had sold its BEKON shares for no initial consideration and that it was unable to assess, at that time, whether it would receive any future consideration. Tejoori’s share price closed 13% down on the day of the announcement.

Tejoori breached Article 17(1) of MAR because it did not release an announcement about its shareholding in BEKON as soon as possible after being informed on 12 July 2016 that there was a reasonable expectation that it would be required to sell its shares in BEKON for no initial payment and with only a possibility of receiving deferred payment that was lower than Tejoori’s valuation of its investment. It was Tejoori itself that alerted the FCA to its misdeeds.