FCA fines former Carillion finance directors £371,700 for misleading statements

Richard Adam and Zafar Khan were sanctioned for knowingly issuing misleading statements regarding the company’s financial health and share value. As finance directors, the pair had responsibility for Carillion’s procedures, systems and controls relating to financial reporting. These were not sufficient to ensure that contract accounting judgments made in its UK construction business were made, recorded and reported appropriately.

Despite being aware of serious deterioration within Carillion’s UK construction business, the regulator found that neither director properly updated the market, the board, or the audit committee. This failure to maintain adequate systems and controls led the FCA to find both acted recklessly and were knowingly concerned in breaches by Carillion of the Market Abuse Regulation and the Listing Rules.

Mr Adam and Mr Khan have been fined £232,800 and £138,900, respectively. The fines were imposed after Mr Adam and Mr Khan withdrew their challenges to the FCA’s decision. These figures reflect a 10% discount for cooperation.

Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Those in positions of responsibility have a duty to keep the market accurately and adequately informed.

“With Carillion, we have seen the serious impact it can have when they don’t. The action taken against Mr Adam and Mr Khan demonstrates our commitment to preventing market abuse and upholding the standards we expect.”

Their tenures, Mr Adam serving from 2007 until late 2016, and Mr Khan for a portion of 2017, preceded the firm’s failure in 2018. The liquidation left £7 billion in debt, cost taxpayers approximately £150 million, and resulted in over 3,000 redundancies.

The regulatory fallout has extended beyond the directors to Carillion’s auditors. KPMG was previously fined nearly £21m by the Financial Reporting Council for its lack of rigour and failure to adopt a robust approach during audits.