Wolfson Microelectronics was fined £140,000 by the UK regulator for failing to reveal information to the market

Wolfson Microelectronics was fined £140,000 by the Financial Services Authority (FSA) for failing to reveal price sensitive information to the market as soon as possible.

The reporting delay led to a false market in Wolfson shares for 16 days, according to the FSA.

The fine shows the City watchdog’s toughening stance on companies which are slow to update the market.

According to the FSA, in March 2008, a major customer informed Wolfson that it would not be required to supply parts for future editions of two of its products.

Wolfson estimated that this represented a loss of $20m or 8% of its forecast revenue for 2008. The FSA said the negative news should have been disclosed as quickly as possible.

Instead Wolfson discussed the matter with its investor advisors who recommended that it refrain from disclosing the news and the company delayed making an announcement.

“It is unacceptable for a company not to disclose negative news because it believes other matters are likely to offset it.

Sally Dewar, FSA

Later, Wolfson reconsidered the earlier advice and on March 27, the company announced the negative news and its share price closed down about 18%.

Sally Dewar, managing director of wholesale and institutional markets at the FSA said: ‘It is unacceptable for a company not to disclose negative news because it believes other matters are likely to offset it. Doing this hampers an investor’s ability to make informed investment decisions and risks distorting the market value of a company’s shares.’

“Companies have the primary responsibility for meeting their disclosure obligations. While they may benefit from seeking advice from those in a position to comment on their regulatory requirements, they cannot rely, without due consideration, on such advice.’

In determining the final penalty, the FSA took into account that the company had sought advice.

Wolfson co-operated fully with the FSA investigation, and received a 30% discount of the £200,000 fine for early settlement.

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