Non-disclosure costs Mytravel £240,000

A decision in July 2002 by the chief executive and group finance director of Mytravel not to announce the discovery of £24.3 million in prior year unaccounted for exposures, in breach of Listing Rule 9.2(c), has cost the firm a regulatory fine of £240,000. Mytravel’s UK division came across the previously unrecognized amounts during a review of its accounting records in the early part of the financial year ending 30 September 2002 (FY02). The two senior officers reasoned at the end of July that no announcement was needed since the shortfall would be offset by non-recurring gains expected in the last part of the financial year and the firm’s overall profit forecast was unaffected. However, they failed to take professional external advice or to tell the board of their decision. On 28 November 2002 the firm reported a total loss of £72.8 million for FY02.The FSA notes that while the firm’s forecast profit level may not have changed at the end of July, this was not true of its “expectations as to the source, composition and timing” of the projected earnings. “Given the high risk business environment [in the wake of the 11 September attacks on the US in 2001] and large amounts concerned, the market should have been given the information promptly,” says the Final Notice. It observes that the prior years exposures accounted for 16.7% of analysts’ consensus view of My Travel’s estimated profits before tax at the start of FY02 and 22.4% at the end of July 2002, when the irregularities were known.