Aviva escapes fine over preference shares confusion

Credit: REUTERS/SIMON DAWSON

Britain's markets watchdog censured Aviva on Monday for "confusing" investors by making a potentially misleading announcement regarding its preference shares but stopped short of slapping a fine on the British insurer.

LONDON, Oct 26 (Reuters) - Britain's markets watchdog censured Aviva AV.L on Monday for "confusing" investors by making a potentially misleading announcement regarding its preference shares but stopped short of slapping a fine on the British insurer.

The preference shares, which give holders fixed dividends that take priority over ordinary share dividends, fell sharply after Aviva said in March 2018 it might cancel them below their value.

The Financial Conduct Authority opened an investigation into the announcement.

"Aviva made the announcement when it had, in fact, formed no intention to cancel the preference shares in question. The impression given by the announcement was not accurate," the FCA said in a statement on Monday.

The FCA said it found that Aviva had failed to consider properly its obligations to take reasonable care to ensure the announcement was not misleading and how it might be interpreted by markets.

Aviva said it accepted the FCA's decision and it was sorry for the "disappointing episode" and that lessons have been learned.

Aviva’s breach was serious but not intentional, the FCA said, adding that the insurer acted to clarify the announcement and provided a payment scheme for affected preference shareholders, many of whom were retail investors

"But for Aviva’s prompt clarification and the payment scheme, this case could have led to a financial penalty," said Mark Steward, the FCA's executive director for enforcement and market oversight.

(Reporting by Huw Jones; editing by Carolyn Cohn)

((huw.jones@thomsonreuters.com; +44 207 542 3326; Reuters Messaging: huw.jones.thomsonreuters.com@reuters.net))

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