British watchdog to review Aviva treatment of shareholders

Britain’s markets watchdog will review Aviva’s treatment of its preference shareholders to see if any of them lost money following the insurer’s decision to drop a plan to cancel these high-yielding shares.

The preference shares, which give holders fixed dividends that take priority over ordinary share dividends, fell sharply after Aviva said earlier this month it might cancel them.

Cancelling the shares would have saved Aviva about £38 million (€43.4 million) a year in coupon payments.

The preference shares recovered after Aviva said on Friday it would not go ahead with the plan, following complaints from shareholders and the British parliament’s treasury select committee.

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"We are focusing on the treatment of those holders (and potentially now former holders) of the company's irredeemable preference shares that may have lost out financially as a result of these events," the Financial Conduct Authority said in a letter to the treasury select committee. "We are undertaking a review to establish whether there are circumstances that might require an investigation to be conducted."

Transparency

The FCA said it was also looking at whether the way the FTSE 100 insurer’s plan was communicated was in line with listing, transparency and disclosure rules.

“Our immediate concern had been to understand the basis upon which Aviva was acting, including the clarity of the information available to securities holders . . . along with the market integrity concerns that the proposals raised.”

FCA chief executive Andrew Bailey added that the agency "welcomes the fact that the company has since clarified the position in its announcement on the 23rd March, 2018, and [Aviva chief executive] Mark Wilson's statement that 'preference shareholders can rest secure in their holdings' ".

Preference shares issued by other financial firms such as Lloyds and Standard Chartered fell across the board as investors worried that the firms might follow Aviva’s lead in finding a way to cancel the shares, which are generally described as irredeemable.

The FCA said it could support a broader review of the legal issues raised by this case, but also said that legal changes might not come within its remit. Treasury committee chairwoman Nicky Morgan responded in a public letter that she expected the treasury to tackle the legal uncertainty around preference share rights "as a matter of urgency".

Aviva declined to comment.

– Reuters