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A Formal Request to the Financial Reporting Council to investigate First Derivatives

By Tom Winnifrith, The Sheriff of AIM | Wednesday 14 November 2018

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.

As you may be aware, the accounting watchdog, the Financial Reporting Council (FRC) is a great admirer of the work of The Sheriff of AIM. And always keen to give my good friends a pointer, I have today submitted a formal request to investigate the last three year’s accounts of First Derivatives (FDP).  The issue is whether stated earnings represent the underlying picture. My letter, below, is to the point.

Dear Sirs.

The accounts of First Derivatives PLC have been audited for almost twenty years by the scandal plagued Belfast office of KPMG. It is quite extraordinary that there has been no pressure for a change of auditor.

It is all the more extraordinary in that there is compelling evidence that the stated earnings for the past three years do not reflect the true picture of underlying earnings generated. This is explained in full in the attached article (HERE)

There is an additional issue. First Derivates spends material sums investing in small start up enterprises in Northern Ireland. In the past such enterprises have then conducted transactions with First Derivatives which do not appear to be at arms length and again give the distinct impression of being a panama pump type scheme designed to inflate earnings.  I might ask you to consider an investigation of the 2001 accounts on that basis as per the attached article HERE 

I would ask that all transactions between current investee companies and First Derivatives also be investigated with reference to the accounts from the past three years.

If you have any questions please feel free to contact me and but I hope that the material provided is sufficient to commence a formal investigation.

Yours sincerely

Tom Winnifrith


Shares in First have almost halved since I started to expose its issues and now trade at £23.10. I sense that some institutional holders are starting to wake up to its shocking corporate governance issues, aggressive accounting, woeful lack of cash generation and huge looming funding gap to close the Kx deal and are selling.  That trend will continue. The shares should b e trading at way closer to £10 than £20.

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