MPs question Quindell’s share dive
The Independent has reported that the FCA is facing mounting pressure to reveal details of its investigation into a ‘deeply worrying’ allegation of market abuse by Quindell, that left hundreds of retail investors with huge losses.
Vince Cable, the business secretary, and Andrew Tyrie, chairman of the Treasury Select Committee, have written to the Financial Conduct Authority (FCA) calling for information on its response to the share price collapse of the insurance outsourcer Quindell last April. A number of other MPs and hundreds of investors have also petitioned the watchdog.
In a letter seen by The Independent, Mr Cable said allegations of ‘potential market abuse’ raised by a constituent were ‘deeply worrying’ and posed questions to the regulator about its response to the incident.
The value of Quindell, listed on the alternative investment market, plummeted by £1bn last year after a US short-seller published allegations about the business online. The company denied the claims and won a court case in the UK against the short seller, which failed to provide a defence. But the shares have not recovered, and Quindell’s investors, most of them individuals rather than institutions, have been left with hundreds of thousands of pounds worth of losses.
The Quindell Shareholder Action Group (QSAG), which represents more than 1,000 investors, believes the company could have been a victim of market abuse and has been calling for the FCA to investigate. But the group claims to have been stonewalled by the watchdog, which will not even confirm whether it has looked at the incident.
A spokesperson for the QSAG said, ‘We raised 15 questions with the FCA and they’re refusing to answer any of them. This is tantamount to a burglar robbing your house and the police saying, ‘We might investigate this or we might not, but if we do, we can’t tell you the outcome.’ That’s ridiculous. This is an organisation that’s supposed to protect investors.’
The FCA only reveals details of investigations if wrongdoing is uncovered and once they are concluded, so as not to unduly affect a company’s share prices.
Mr Tyrie has written to the FCA’s chief executive, Martin Wheatley, asking him to explain why the regulator did not impose a temporary ban on short-selling despite the fall triggering alarm bells.
The former secretary of state Peter Hain has also written to the regulator, and this week submitted two questions to the Treasury on the matter. He told The Independent, ‘It is scandalous that thousands of Britons who invested in Quindell, many of whom put their life savings into this company, have seen the value of their shares plummet. The FCA has failed these investors abysmally and continues to duck its responsibilities, with the Chancellor unwilling to intervene.’
An FCA spokesperson said, ‘We take all allegations of market abuse very seriously. Every allegation notified to us is reviewed by our market monitoring department. However, we do not comment on individual cases.’