The City watchdog has imposed significant financial penalties on two former finance directors of the collapsed construction giant Carillion for market manipulation. The Financial Conduct Authority (FCA) found Richard Adam and Zafar Khan responsible for making "misleading" statements to the market while aware of the firm's dire financial state.
Details of the FCA's Enforcement Action
The FCA announced fines of £232,800 for Richard Adam and £138,900 for Zafar Khan. The penalties follow the pair's withdrawal of their challenges to the regulator's decision. The watchdog stated that both directors were conscious of "serious financial troubles" within Carillion's UK operations but failed to ensure this was accurately reflected in company announcements.
Steve Smart, the FCA's joint executive director of enforcement and market oversight, emphasised the duty of those in senior positions. "Those in positions of responsibility have a duty to keep the market accurately and adequately informed," he said. "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."
The Misconduct and Wider Collapse
The fines relate to market manipulation, with the directors accused of knowingly giving misleading signals about Carillion's share value. The FCA also found they did not take "reasonable steps" to ensure the company maintained adequate procedures or complied with its listing rule obligations.
Legal experts noted that both men received a 10 per cent discount on their fines for cooperating with the FCA's investigations. Chris Roberts, a partner at Grosvenor Law, commented on this aspect of the settlement.
Carillion's collapse in January 2018 was a major corporate disaster, leaving nearly £7 billion in debts and causing over 3,000 job losses. Richard Adam served as finance director from April 2007 to December 2016, handing over to Zafar Khan, who held the role from January to September 2017.
Brother Fallout and Taxpayer Cost
The fallout from Carillion's failure extended to its auditors. Big Four accountant KPMG, a top client, was fined £20.9 million by the Financial Reporting Council (FRC) in 2023 for failures in its audit of the company. The FRC said KPMG did not adopt a "rigorous and robust approach," and it also ordered the firm to pay £5.3 million in investigation costs.
The devastating collapse, which impacted numerous government contracts, is estimated to have cost taxpayers approximately £150 million. The FCA's latest action underscores the ongoing regulatory reckoning for those deemed responsible for the misinformation that preceded the firm's implosion.
