Investors suffering losses following a significant fall in a company's share price may have a claim for compensation under the Financial Services and Markets Act 2000 (FSMA). 

Sections 90 and 90A, together with Schedule 10A, of the Financial Services and Markets Act (FSMA) provide statutory routes for investors to recover losses caused by misleading statements, dishonest omissions, or dishonest delays in the publication of information by companies in the UK.

At Edwin Coe, we advise investors on these claims. This three-part series explains how the regime works, what investors need to establish, and the important differences between each route to recovery.

This is Part 3 of our Stock Drop series and covers when companies are required to disclose anti-money laundering investigations to the market. Such investigations frequently sit at the centre of stock drop claims as they can have a significant impact on investor confidence and share prices. At the same time, they give rise to difficult disclosure decisions that may later form the basis of claims under s.90A and Schedule 10A FSMA.

Other parts of the Stock Drop series are available here:

• Part 1: Section 90 FSMA: Misstatements or omissions in listing particulars.
• Part 2: Section 90A and Schedule 10A FSMA: Misleading the market. 

Anti-Money Laundering Investigations

When a listed company becomes the subject of an anti-money laundering investigation, one of the most pressing questions it faces is whether – and when – that fact must be disclosed to the market. 

The answer is not straightforward. Whether a company must disclose an investigation, and whether it may (or must) lawfully delay doing so, turns on a fact-specific analysis that can have significant consequences for both the company and its investors.

Does a Money Laundering Investigation Have to Be Disclosed?

A company under investigation for money laundering is not automatically required to disclose that fact. 

Under Article 17 of UK Market Abuse Regulation (UK MAR), issuers must inform the public as soon as possible of inside information that directly concerns them. Inside information is defined as information of a precise nature, not yet made public, which relates to the issuer or its securities and which, if made public, would be likely to have a significant effect on the price of those securities.

The critical question is therefore whether knowledge of the investigation, if it were made public, would be likely to have a significant effect on the company's share price. In many situations, it would, particularly a wide-ranging investigation with potential for criminal prosecution or significant financial penalties.

When is delay permitted?

Even where an investigation does constitute inside information, UK MAR expressly permits delayed disclosure in certain circumstances. 

An issuer may delay public announcement if three conditions are satisfied: 

1. immediate disclosure would be likely to prejudice the issuer's legitimate interests; 
2. delay would not be likely to mislead the public; and 
3. the issuer is able to ensure the confidentiality of the information.

In the context of an ongoing money laundering investigation, a company may be able to argue that premature disclosure would prejudice its ability to cooperate with investigators, compromise the integrity of the investigation itself, or unfairly damage the company's reputation before any findings have been made. Where no charges have been brought and no findings established, there may also be a credible case that immediate disclosure would be disproportionate and harmful to the company's legitimate interests.

The Supreme Court's decision in ZXC v Bloomberg is relevant in this context. The Court held that a person under criminal investigation has, prior to being charged, a reasonable expectation of privacy in respect of information relating to that investigation. While that case concerned the law of misuse of private information rather than securities disclosure obligations, the privacy interests it identifies are capable of informing the assessment of ‘legitimate interests’ under Article 17(4) of UK MAR.

What are the limits of permitted delay?

The FCA expects issuers to keep the assessment under active review. Delay cannot be used to suppress information indefinitely and, where press speculation or market rumour emerges, the issuer must reassess whether its general obligation to disclose has already been triggered under Article 17(1). 

If speculation has given rise to inside information in its own right, the permitted delay may no longer be available.

The absence of findings in an ongoing investigation cuts both ways. On one hand, it may support an argument that the company was entitled to delay disclosure. On the other, where a company continued to publish positive statements about its compliance and governance while aware of a serious investigation, investors may have a strong basis for arguing that those statements were knowingly misleading.

In practice, disclosure decisions in this context sit at the intersection of market transparency and criminal enforcement, and timing errors can create significant exposure under s.90A.

When delay may be necessary?

There may be circumstances in which an issuer is required to delay disclosure of an extant investigation.

Under sections 333A-333D of the Proceeds of Crime Act 2002, it is a criminal offence where a person in a regulated sector (such as banks, accountants, lawyers) discloses information that is likely to prejudice an anti-money laundering investigation.

Even where this provision does not apply, disclosure that an investigation is underway may still prejudice the investigation and will typically be treated as highly confidential, particularly where authorities indicate that disclosure should be restricted.

In practice, this risk of prejudicing an investigation – whether or not it amounts to an offence - can constitute a legitimate interest under Article 17(4) UK MAR, justifying delayed market disclosure provided confidentiality is maintained and the delay does not mislead the public.

The Consequences of Non-Disclosure

Where a company fails to disclose an investigation when required to do so, investors who suffer loss may have a claim under s.90A of FSMA and Schedule 10A.

Section 90A creates liability for fraudulent misstatements, dishonest omissions, and dishonest delays in published information. 

Further information on s.90A is set out in Part 2 of our Stock Drop series.

How Edwin Coe Can Help

Whether you are an investor who has suffered loss following the belated disclosure of a money laundering investigation, or a company seeking to navigate your disclosure obligations in real time, Edwin Coe can provide clear, specialist advice. 

We advise on the interaction between UK MAR disclosure obligations and liability under s.90A and Schedule 10A, the conditions for permitting delay, and the evidentiary requirements for establishing or defending claims.

To discuss a potential claim, please contact Alexander Shirtcliff and Sam Harris in our Commercial Disputes team.