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FPPP post-mortems10 September 2026 · next edition Thursday

Where the procedures failed, and what would have caught it

A casebook, not a news feed. Each entry takes a case where a regulator, a court or the company itself has said that financial position and prospects procedures fell short, and names the criterion in the pack whose evidence test addresses it.

The takeaway

In all three the finding is the absence of a written process rather than the absence of skill, and in all three the gap had been open for years before anything surfaced it.

  • Write the process down where the people are good. Expertise is what makes an undocumented process survive long enough to matter.
  • Compare the number to something outside the company. An internal budget and last year's results are both numbers you chose.
  • A balance that carries forward is a balance nobody has re-derived. Ask for the reconciliation, not the pack.

Three cases in which the missing thing was a written process rather than a competent person · sources retrieved 10 September 2026

A case earns a place here only where a regulator, a court or the company itself has said the procedures fell short. Two matters were read for this edition and left out on that test: one where the final notice makes a disclosure finding and no finding at all about the issuer's procedures, and one where the regulator closed its investigation without taking action. Neither absence is a criticism of anybody. It is simply that this feed has nothing to say about a case where no authority has said the procedures failed.

1. Forecasts covering a quarter of the business, measured against a number the company set itself

On 25 July 2019 the FCA published a final notice, dated 28 June 2019, imposing a penalty of £411,000 on Cathay International Holdings Limited, a holding company based in Hong Kong and premium listed on the London Stock Exchange, whose largest subsidiary supplied between 70% and 80% of group revenue during 2015. The Authority found that Cathay breached Listing Principle 1 — which the notice describes as requiring a listed company "to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations" — and that the breach was reckless. The notice is specific about what was absent. Cathay "had no documented procedures which set out how it forecast its expected financial performance", and it had "no adequate procedures, systems and controls to comply with its obligations under Chapter 2 of the DTRs in relation to how it would forecast and monitor how it was performing against market expectations". Until 6 December 2015 it had produced no completed year-end forecast covering the whole of its business. The reason is the part worth reading twice: the largest subsidiary, separately listed and running its own forecasting process, did not supply a year-end forecast for the August 2015 board meeting, and the Authority found that Cathay "did not have any procedure in place to generate forecasts for its subsidiaries" where a subsidiary did not provide one. So the board considered year-end forecasts for the remaining subsidiaries only, and — in the notice's words — "only assessed forecasts for approximately 20% to 30% of its business". What forecasts there were, and the monthly consolidations, were compared to the internal budget the board had set in March 2015 and to the previous year's published results, but not to market expectations. The Authority further found that Cathay's performance monitoring "did not include any means of assessing whether the performance of Cathay constituted inside information". On 29 December 2015 Cathay issued a trading update disclosing a material loss before tax against a projected 56% deviation from market expectations, and the share price fell 18.2% that day. Cathay also breached Listing Principle 2 by giving the Authority, during 2016 correspondence, information about its forecasting procedures that was materially different from the processes actually followed; the notice records that the Authority accepts Cathay did not intend to mislead it. No settlement discount applied — Cathay made representations, which are summarised in the notice's own Annex B — and the FCA has said that the company and two individuals decided not to refer the matter to the Upper Tribunal. The notice states that the Authority "does not make any criticism of any other person or entity in this Notice", and records that Cathay's appointed advisers had advised it on its disclosure obligations in August 2015.

What would have caught it: fb-3 is the direct test and it is deliberately not satisfied by owning a model — it asks for the re-forecast cadence, the triggers for an out-of-cycle re-forecast, and the two most recent re-forecasts with what changed between them. A group that cannot produce a year-end forecast for the entity supplying most of its revenue has no second re-forecast to show, and the gap is visible the moment somebody asks for the pair rather than for the process document. fb-7 is the criterion this case turns on hardest: it names who tracks consensus, how the company's own forecast is compared against it, and the threshold at which a trading update is considered. Comparing the forecast to an internally-set budget and to last year passes an internal review and fails this test, because neither of those numbers is the one the market is holding. fr-5 is the body that is missing behind the third finding — the disclosure committee is what decides whether something is inside information, and "performance monitoring included no means of assessing" that is a decision with nowhere to be taken. mr-2 catches the collection problem underneath all of it: a published close calendar plus the actual issue date of each of the last six packs. Subsidiary results arriving between two and four weeks after month end, and occasionally later, against no written process, is a calendar that does not exist rather than a calendar that slipped.

Touches fb-3, fb-7, fr-5, mr-2 — check yours · run the free scan

2. Seven years of dealing clearances given informally and never written down

On 13 January 2015 the FCA issued a final notice imposing a penalty of £539,800 on Reckitt Benckiser Group Plc, reduced from £771,190 for early settlement. The relevant period runs from 1 July 2005 to 8 October 2012 — seven years — and the Authority found breaches of Listing Rule 9.2.8R, of DTR 3.1.4R(2) and DTR 3.1.5R, and of the two Listing Principles then requiring a listed company to take reasonable steps to enable its directors to understand their obligations under the Model Code and to establish and maintain adequate procedures, systems and controls. The notice's own summary of why the failings occurred is a list of procedural absences rather than of decisions. RB's "systems and controls were not adequate in that they did not enable it to monitor effectively all share dealing by its PDMRs" — persons discharging managerial responsibilities — "or to identify potential or actual breaches of its share dealing policy and the Model Code, with the result that it failed to detect breaches in a timely manner". It "failed to review its share dealing policy to identify or mitigate certain risks which subsequently crystallised". It "placed an over-reliance on the knowledge and experience of its PDMRs to comply with the Model Code". It "used an informal process for clearance to deal under the Model Code without keeping adequate records of any such clearance given". And it had provided a copy of the Model Code and an explanatory document to its PDMRs in July 2005 but "failed to follow this up with regular or structured training or reminders", save for close-period reminders and an annual certification. When two dealings did occur in breach of the Model Code, the notifications to the market were late and, when made, omitted the precise dates of the transactions, the place, the price and the dates on which the company was notified. The Authority is explicit about what it is not saying: "the Authority does not allege that any of the share dealing by the PDMRs referred to above took place on the basis of inside information." Read against the findings, none of this is about anyone lacking skill. It is that the clearance process left no record, so nothing downstream of it could be checked.

What would have caught it: fr-6 is one of the seven gates, and this is the limb of it people skip. The criterion asks for insider lists, a PDMR notification process, and a route for identifying and disclosing inside information — and the evidence test asks for the maintained register plus the documented procedures with a named owner. An informal clearance conversation satisfies none of that, and its failure mode is exactly the one in the notice: there is nothing to reconcile against, so a breach is not detected rather than not committed. st-6 is the monitoring half — who checks compliance with the listing obligations, on what cycle, and how exceptions reach the board. "Exceptions reported, not just compliance asserted" is the whole distinction, and a company that cannot detect a breach has no exception to report. fr-7 is the deadline half: every external reporting obligation mapped to a named individual with the deadline monitored. A PDMR notification due by the end of the following business day is precisely the kind of obligation that has no owner until somebody writes one down, and the notice records both that the notifications were late and that they were incomplete when they came.

Touches fr-6, st-6, fr-7 — check yours · run the free scan

3. A balance carried forward for years because nothing required anyone to re-derive it

This one is the company's own account, not a regulator's. On 26 June 2023 Braemar Plc, admitted to the Official List in November 1997, announced that the board and the Group's auditors had been carrying out an investigation into a transaction of around $3m originating in 2013 and involving payments through to 2017, and that the board was "not presently comfortable with the manner in which the transaction has been historically represented and the remaining liability recorded in the Company's balance sheet". The same announcement stated that the company would not publish its audited FY23 results by 30 June 2023 as the Disclosure Guidance and Transparency Rules required, and that it would request suspension of trading in its shares; the suspension took effect on 3 July 2023. The investigation was conducted by an independent forensic accounting firm and external counsel, overseen by an investigation committee of the independent non-executive directors, and it ultimately covered several transactions between 2006 and 2013. The results were published on 16 November 2023 and the listing was restored on 21 November 2023 — four and a half months suspended. Two disclosures in those results are the substance of the case. The company recognised a £2.0m provision, of which £1.7m related to historical unsettled commission payable "recorded in 2017 upon completion of the relevant contracts, which originated in 2013", reclassified out of trade payables. And, separately, note 35 records that "during the preparation of the 2023 Financial Statements, errors in consolidation entries from prior years were identified", errors dating "back to before 2021" that "were not fully corrected as part of the prior year adjustments" in the previous year's accounts: a consolidation error on a 2019 divisional disposal that overstated other receivables and retained earnings by £1.1m, and an error in the elimination of intercompany balances. Balance sheets at 28 February 2022 and 1 March 2021 were restated under IAS 8. On the procedures themselves the company said, in the chairman's statement, that the board "acted promptly to address the process and control areas that were identified as requiring improvement, including taking key remedial actions", and that it "will ensure the remedial actions are tracked through to completion". The results the company eventually published reported revenue of £152.9m and underlying operating profit of £20.1m, which it described as an outstanding year; the restatement fell on the balance sheet, and the company reported c.£2.5m of non-recurring investigation costs in the following year.

What would have caught it: re-10 is the criterion for the state of the ledger rather than the arrival of the pack, and its evidence test is the awkward one — for the most recent closed month, the trial balance and the key balance-sheet reconciliations, showing they were completed and reviewed. An other-receivable overstated since a 2019 disposal is a balance-sheet reconciliation that no month's close ever produced, and it is invisible to any test that only asks whether the management accounts arrived. re-11 is the bridge: a documented reconciliation between the management accounts and the statutory IFRS position, with the bridge for the most recent period retained and explained. Consolidation entries are exactly where the two can diverge without either looking wrong on its own, and a bridge that is retained and explained is where a stale elimination has to be named. fr-4 is the deadline discipline — a reporting calendar worked back from the DTR deadlines with each step owned and the review gates marked — and this case is what a missed one costs: a four-and-a-half-month suspension, on a year the company describes as a record. re-7 is the last of the four, and it is the criterion the company's own sentence describes: a documented process stating how deficiencies are logged, rated for severity, communicated, assigned and cleared, with timescales and an escalation threshold to the audit committee. Tracking remedial actions through to completion is the thing re-7 asks for. The question the criterion puts is whether the register existed before the investigation, not after it.

Touches re-10, re-11, fr-4, re-7 — check yours · run the free scan

Sources

It was found in their procedures. Is it open in yours?

Every case above names the criteria it touches. The free scan walks 15 of the 73 across all nine FPPP areas, checks your answers against each other, and tells you where they contradict. It runs entirely in your browser — nothing is sent anywhere, and nothing is stored.

Run the free scan →Read all 73 criteria

Published Thursdays. This is a casebook rather than a news feed: an older case that has not been covered is as welcome as a recent one. Compiled from public regulatory notices, court judgments and companies’ own announcements, and cited to them. It is not legal advice, not investment advice, and not a comment on any company’s prospects or securities.

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