Experts raise financial compliance alarm

AIT software execs jailed

Industry experts have warned directors of IT companies to keep systems up to date and comply with corporate and financial regulations, or risk imprisonment.

The advice comes after last week’s jailing of two former directors of software company AIT, under the Financial Services and Markets Act, for misleading the market with an inaccurate stock exchange announcement.

Former AIT chairman and chief executive Carl Rigby, 43, and former chief financial officer Gareth Bailey, 36, were disqualified from their company directorships and sentenced to three and a half years and two years in prison respectively.

The pair were convicted of ‘recklessly’ issuing a statement via the Regulatory News Service three years ago, announcing that company turnover and profits were in line with expectations.

But the software firm had not closed several deals, which subsequently fell through, that were key to company forecasts, resulting in a share price drop.

‘Directors can expect to be held personally responsible for the announcements they make to the market, as these convictions have shown,’ said Margaret Cole, director of enforcement at the Financial Services Authority (FSA), which prosecuted the pair.

An FSA spokeswoman told Computing that company directors need to be certain they have the correct procedures and financial reporting systems in place to avoid misreporting.

Nick Kalisperas, director of trade body Intellect, says accurate information systems are key to ensuring compliance with growing levels of legislation.

‘The key is information,’ he said. ‘Directors need to understand the procedures and regulations that exist, and how they must comply with them.’

Small to medium-sized organisations that are less likely to have dedicated compliance officers are most at risk, he says.

‘But at the same time, government needs to make sure that people are not over-burdened with regulation,’ said Kalisperas.