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Wasps' accounting under a cloud as UK's financial regulator presses ahead with formal investigation
Wasps are being investigated by the UK’s financial regulator over whether it misled the market about the state of its finances and how quickly it rectified the matter.
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An in-depth report in the Friday edition of The Financial Times claims that the Financial Conduct Authority’s scrutiny comes after the 152-year old Premiership club admitted to creditors in late 2017 that it had overstated its earnings, breaching covenants on a £35million retail bond, and its auditors, PwC, stepped down after finding “falsified” information.
The FT alleges that a £1.1m capital injection by Derek Richardson, the Irish businessman who owns Wasps and is its chairman, was wrongly stated as income. According to a market announcement made in December 2017, this cut the club’s earnings to £2.4m rather than the £3.5m it first stated.
Proceeds of Wasps’ bond, which is traded on the London Stock Exchange, go partly towards developing the club’s Ricoh stadium in Coventry and refinancing debts. The accuracy and timeliness of statements to the markets made by Wasps’ special purpose vehicle, the issuer of the bonds, are overseen by the FCA.
The newspaper report goes on to state that according to people familiar with the situation, the financial watchdog has opened a formal investigation and is summoning individuals for interviews. The FCA has the power to fine and criminally prosecute breaches of its market-cleanliness rules.
The 152-year old Premiership club admitted to creditors in late 2017 that it had overstated its earnings https://t.co/PcZzEwiToo
— Financial Times (@FinancialTimes) April 12, 2019
Wasps’ overstatement prompted PwC to quit in May, complaining it had been “provided with evidence which our testing revealed to have been falsified” and that “given the seriousness of these events” it no longer felt it “appropriate” to continue in the role, according to a statement filed to Companies House.
A 2018 review by the club found that “a number of items held on the balance sheet could not be substantiated, and the move on to the new accounting system at the end of 2016 resulted in various transactions being recognised in the old system after the statutory accounts had been finalised”. So stated Wasps’ most recent accounts, which were filed in January.
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The FCA and Wasps declined to comment to the FT.
Some of these figures are crazy 👀 https://t.co/WzSk8g4KGS
— RugbyPass (@RugbyPass) April 9, 2019
