In a very rare decision, the Takeover Panel has published a
statement on its website requiring all firms and advisers regulated
by the Financial Conduct Authority to "cold-shoulder" two
individuals for systematically making dishonest and false
representations to the Panel during its investigations into
potential breaches of The City Code on Takeovers and Mergers (the
Code). Cold-shouldering is the most severe form of sanction
available to the Panel and this is only the third time in its
history that it has exercised this power. The effect of a
cold-shoulder order is that no entity or professional adviser
regulated by the Financial Conduct Authority may act for the
individuals concerned on any transactions that are governed by the
Background to the decision
Rule 9 of the Code requires a mandatory offer (Rule 9 Offer) to
be made to the holders of shares carrying voting rights in a
company which is subject to the Code (unless the Panel consents
otherwise) by any person who acquires an interest in shares which,
together with interests held by persons acting in concert with him,
carry 30% or more of the voting rights of the company.
Mr Bob Morton and his close family (through a series of
controlled companies) owned 28.32% of Hubco Investments PLC (Hubco)
upon its admission to ISDX. A further 3.38% of Hubco was acquired
by Groundlinks Limited, a company controlled by Mr Morton's
family. The effect of this acquisition was that the aggregate
interest held by Mr Morton's family in Hubco stood at 31.6%,
thereby passing through the 30% threshold and requiring Mr Morton
to make a Rule 9 Offer for the remaining shares in Hubco.
Mr Morton's broker identified and informed Mr Morton that
the obligation to make a Rule 9 Offer had been triggered and
advised him to consult the Panel. Mr Morton then informed his
broker that Groundlinks had in fact purchased the 3.38% holding for
a third party's benefit. The third party was a friend of Mr
Morton's son, Mr John Garner. It later transpired that the
agreement to document the arrangement between Mr Morton and Mr
Garner was entered into after the acquisition of Hubco shares had
been made and that the agreement had been back-dated.
Investigation and Panel ruling
The Executive of the Takeover Panel launched an investigation
into the conduct of Mr Morton and Mr Garner.
The Panel expects any person dealing with it to do so in an open
and co-operative way. It also expects prompt co-operation and
assistance from persons dealing with it and those to whom enquiries
and other requests are directed. In dealing with the Panel, a
person must disclose to the Panel any information known to them and
relevant to the matter being considered by the Panel (and correct
or update that information if it changes). A person dealing with
the Panel or to whom enquiries or requests are directed must take
all reasonable care not to provide incorrect, incomplete or
misleading information to the Panel.
The Executive found that Mr Morton and Mr Garner had
systematically provided information to it which they knew to be
false and that they intended to deceive the Executive into
believing that the purchase of shares in Hubco had been made for Mr
Garner pursuant to a prior agreement between Mr Morton and Mr
Garner. In reality, the two individuals had invented the agreement
in order to avert the perceived risk that the purchase had had the
effect of triggering the requirement to make a Rule 9 Offer for
The Executive found that the attempted deception in the course
of its investigation was so serious and so prolonged as to merit
the "cold-shouldering" of Mr Morton and Mr Garner for
periods of six and four years, respectively.
Rather ironically, it transpired that the aggregate interest of
Mr Moron's family in Hubco was actually in excess of 50% of
Hubco's share capital at the time that Groundlinks acquired the
3.38% holding in Hubco, meaning that the acquisition did not
trigger the need to make a mandatory Rule 9 Offer as Mr
Morton's family already had effective control at that
point. However, the conduct of Mr Morton and Mr Garner
during the course of the Executive's investigations into their
potential breaches of the Code meant that the Panel could only
conclude that they were persons that were not likely to comply with
the provisions of the Code and it therefore issued the
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