Former non-executive chairman of UK-listed company fined for unlawfully disclosing inside information following negligence

Christopher Gent, former CEO of Vodafone Group plc and Non-Executive Chairman of GlaxoSmithKline plc, has been appointed Non-Executive Chairman of ConvaTec Group Plc (“ConvaTec”), a company admitted to trading on the London Stock Exchange (“LSE”), in October 2016 and served in that role until his retirement in May 2019. In his role, Mr. Gent was responsible for governance and closely involved in preparing ConvaTec for the release of key corporate announcements (“ RNS”) to the LSE. In October 2018, Mr. Gent announced the release of an expected RNS announcement regarding the downgrading of ConvaTec’s financial guidance and the retirement of ConvaTec’s CEO before such information was announced to the market. The disclosures were made to two individuals in senior management positions at two of ConvaTec’s major shareholders, believing that it was in ConvaTec’s interest for those investors to receive the information prior to the public announcement (which was made five days after private communications). The UK Financial Conduct Authority (“FCA”) has determined that Mr. Gent’s actions amounted to unlawful disclosure of inside information and that he had therefore committed market abuse in breach of UK securities regulations. Market Abuse (“MAR”). He was fined £80,000.

The factors relevant to the FCA’s assessment of the conduct at issue were that Mr. Gent was an experienced industry professional and held a leadership position within his organization. In concluding that the market abuse was negligently committed, the FCA held that “[h]who have received relevant training on MAR from ConvaTec’s external legal advisors […], and on the basis of his own considerable experience and position, Sir Christopher should have realized that the information he disclosed constituted, or could have constituted, inside information and that he was not in the normal exercise of his employment, profession or duties to selectively disclose this. Sir Christopher failed to properly apply his mind to the specific question of what information, if any, he might properly disclose, as well as when, how and to whom, and he failed to get clear advice and formal regarding this issue, before making the revelations. The FCA acknowledged and accepted Mr. Gent’s explanation that he believed he was acting in the best interests of ConvaTec in his role as Chairman by making the disclosures, but that could not excuse his actions because the FCA decided that his conduct was undermining investor confidence. in the integrity of financial markets.

Final FCA Opinion (published August 5, 2022) is available here.

Barbara M. Stokes