JJB fined for not disclosing costs

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JJB Sports has been fined for failing to disclose the full costs of buying two rivals

Struggling retailer JJB Sports has been fined for failing to disclose it bought two smaller rivals for £16 million more than it told investors.

JJB acquired Original Shoe Company in December 2007 for £5 million in cash but did not reveal it paid an additional £10 million for the stock in the stores.

And in May 2008, JJB told the market it acquired footwear chain Qube for £1 in cash but did not say that it also paid the company’s £6.5 million overdraft.

The Financial Services Authority (FSA) fined JJB £455,000 after it ruled that its lack of transparency created a false market in its shares for nine months. The fine was reduced by 30% because JJB settled at an early stage in the investigation and would otherwise have been penalised £650,000.

JJB revealed the full cost of the acquisitions for the first time in its interim results in September 2008, when its share price fell by 49.5% amid doubts it could continue as a going concern.

FSA director of markets Alexander Justham said JJB had denied investors the chance to fully understand the company’s financial position.

He said: “The repeated failure to disclose this information showed a lack of regard for the market, the disclosure rules and investors. The action we have taken shows it is unacceptable to tell only part of the story whilst leaving material facts unannounced in the background.”

JJB pointed out that the offences took place under a previous management regime led by former chief executive Chris Ronnie.

The Serious Fraud Office (SFO) recently announced it would not bring any charges after an investigation into JJB and Sports Direct International over allegations of cartel activity between June 8, 2007 and March 25, 2009.

But the SFO is still investigating individuals in relation to allegations of anti-competitive practices and an investigation by the Office of Fair Trading into anti-competitive behaviour in the sports retailing sector is also ongoing.

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