By Tom Winnifrith, The Sheriff of AIM | Wednesday 27 July 2016
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Sky News claims to have a source who says that Nomad and broker Cenkos (CNKS) is to be fined £700,000 by the FCA for its lamentable failings in the Quindell (QPP) fraud - Cenkos has now admiited that a probe is underway. Whilst I see this as another moment of vindication for my work in exposing that fraud it is simply not enough. The FCA is telling the City's banksters that turning a blind eye to white collar crime does pay. Its coke and hookers all round if this is the best that the FCA can do.
As a reminder, Cenkos acted as Nomad and broker to Quindell for more than three years. that will have netted it retainers of at least £250,000. It advised on numerous ( fraudulent in most cases) corporate transactions which will have netted it corporate fees of, I suspect, another £750,000 and it was broker on a fundraise for £200 million - when the company was actually insolvent -and so will have earned £10 million commission on that fund raise.
Sales staff round at Cenkos will have netted 15% commission on that fund raise so will have taken home £1.5 million but that still leaves Cenkos with £9.5 million to hand out to its staff in six figure salaries and bonuses and to reward shareholders with dividends. And that is all dirty money.
For you see, time and time again I contacted Cenkos (as well as the FCA and the Oxymorons at AIM Regulation) with hard, documented evidence that Quindell was committing fraud - all our hundreds of expose articles are listed HERE. Thanks to the Oxymorons ccing me in on one of its email exchanges with Cenkos we know that Cenkos simply stated that my (documented) allegations were not true and the useless regulators bought that line. Now thanks to the FRC and PWC we know my allegations were 100% true.
So in its duties as a Nomad, Cenkos, which was meant to ensure that its PLC clients were not doing things like telling total lies and committing blatant fraud, failed and it deserves to be penalised. But what appears to be proposed is lamentable.
For Cenkos to be fined just 6% of the amount that it took in revenues for assisting, through its negligence, the biggest stockmarket fraud in the UK for 30 years sends out a message to other Nomads and banks "helping crime by turning a blind eye DOES pay." If the only penalty is a fine which is trivial, then The City's finest will regard regulatory sanction for wrongdoing as nothing more than a "cost of sales". It is like the corporate entertainment, the coke and hookers, for fund managers. It is just another cost of doing business.
The regulatory sanction for a crime of the magnitude of Quindell should hurt. It should be at least 200% of the revenues generated. That would be a deterrent to Nomads acting for crooks. What the FCA seems to be contemplating is an encouragement.
Secondly, corporations do not commit (or turn a blind eye) to crime, individuals do.
There are some City slickers round at Cenkos who earned big fat bonuses for landing Quenron as a client and for maintaining that lucrative client relationship. By way of contrast the City's top tech analyst saint Kevin of Ashton was fired by Canaccord, the co-broker to Quenron, for refusing to advise its clients to buy the shares and for stating that Quindell was a fraud. So the folks who turned a blind eye get to keep their jobs and their bonuses and those who exposed crime get fired. What sort of system is that?
If the FCA was serious it would name the individuals responsible and quite simply ban them from acting in a regulated capacity. That would be a deterrent to others.
If the FCA needs clues for who it should be sanctioning at Cenkos it might start with Stephen Keys, Mark Connelly and Bobby Hilliam.
In one sense it is good to see folks starting to be named and shamed. As I look back on the lawers letters Quindell sent me (see HERE and also HERE), the smears, the death threats (HERE) and the industrial scale harassment that me and those connected to me suffered from shareholders who were encouraged in their actions by management and advisers, it is good to see guilty folks being subject to exposure. In due course Rob Terry and others will be prosecuted by the SFO and go to jail which will also feel good.
Today's news is vindication and reward for what was bloody good and brave jounalism. Folks like snot gobbler McCrum might like to try and steal the credit as he and his pompous PR arse-licking pals on the FT always do. But it was me who got the lawyers letters, the death threats and the public recognition from the regulators(see HERE).
However if indeed Cenkos escapes with a fine of just £700,000 and none of its employees are banned for life from financial services it will be another day of shame for the regulators. Not only did they ignore the hard evidence of fraud I sent them for months and months before the balloon went up but now they are sending out a message to the banksters that turning a blind eye to crime DOES pay. That is not going to make the world a better place.
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