Company censured for market abuse

The Financial Conduct Authority (FCA) has censured NMC Health plc, a UK premium listed company which was a private healthcare operator in the United Arab Emirates, for market abuse. The FCA says it would have imposed a substantial financial penalty had the company not been placed into administration in April 2020, with no funds expected to be available once creditor claims have been met.

According to the FCA, between at least March 2019 and February 2020, NMC:

• materially under-reported its level of debt (for example NMC’s 2018 financial report stated that the group’s total debt was US$1.99 billion, whereas it is now estimated to have been US$5.91 billion);
• operated two parallel sets of partial accounting records, including internal spreadsheets where borrowing recorded as “Non-Showing” was not included in the figures reported to the market; and
• with its subsidiary NMC Healthcare LLC, entered into supply chain finance agreements which enabled purported suppliers of NMC Healthcare, who were related parties of NMC, to be paid earlier than their invoice due dates.

In December 2019, Muddy Waters published a report questioning the accuracy of NMC’s financial reporting. NMC responded in two announcements (on 18 and 19 December 2019) dismissing the allegations and reaffirming its broader trading and operational guidance.

The FCA has found that NMC committed market abuse under Article 15 of the EU Market Abuse Regulation (EU MAR) by:

• publishing false or misleading information about its debt position;
• failing to declare related party transactions; and
• disseminating false or misleading statements in its December announcements, when it knew, or ought to have known, that the information was false or misleading.

Article 15 of EU MAR (the relevant regime at the time) prohibits market manipulation, which includes disseminating information which gives, or is likely to give, false or misleading signals as to the supply of, demand for, or price of, a financial instrument (Article 12 of EU MAR).

In the Final Notice, the FCA says that it does not specifically find that each and every member of NMC’s board knew, or ought to have known, that the disseminated information was false or misleading. However, it is satisfied that there was knowledge at a sufficiently senior level within NMC that the disseminated information was false or misleading for that knowledge to constitute the knowledge of NMC.