According to a statement released by the Securities and Futures Commission, Fidelity held, via one of its investment funds, more than 8% of the issued share capital in the limited company and fell within the definition of an “associate” at a time when Little Sheep had announced it was likely to be bought by a shareholder.
On 26 April 2011, an offer period for Little Sheep commenced when Little Sheep announced that it had received an approach from a “substantial shareholder”, Yum! Brands Inc., regarding a possible cash offer to purchase the outstanding share capital of Little Sheep.
On 13 May, the two companies, Little Sheep and Yum, announced a deal to the market. Within the announcement was a reminder to the market to disclose their dealings in Little Sheep, in accordance with Rule 22 of the SFC’s Takeover Code.
Further reminders were made to the market to disclose positions above 5% by the SFC in its monthly “Takeovers Bulletin” and on its Offer Period Tables which is published on its website and updated daily.
However, despite continued reminders, Fidelity conducted 29 trades in Little Sheep between 23 May and 1 June, increasing its position to 8.21%, without making any market disclosure.
The company did finally realise its mistake and voluntarily announced its failings to the SFC. Since then Fidelity has implemented a number of changes to ensure there is not a repeat of the mistake, including providing additional staff training, introducing a process for daily monitoring of takeover announcements on the stock exchange and the SFC website and hiring additional staff.
The SFC’s public criticism of Fidelity is punishment for its breach of the Takeover Code.
In a statement, Fidelity acknowledged it had made the breach due to an “inadvertent oversight” and said it had agreed with the SFC that a “public statement involving criticism” be issued.
It added: “Fidelity proactively self-reported the matter to the SFC immediately after the late disclosures were discovered, and a number of enhanced measures have been taken to ensure future compliance with the Takeovers Code.
“We would like to reiterate that Fidelity Worldwide Investment takes its obligations to make proper and timely disclosure very seriously and has since duly complied with the disclosure obligations under Rule 22 of the Takeovers Code following dealings in Little Sheep shares. We will continue to strive to ensure that our compliance assurance procedures are sufficient to meet all regulatory obligations.”
Fidelity was not able to confirm the name of the fund involved.
