FCA reviews Aviva's scrapped preference share plan

The Financial Conduct Authority is examining whether Aviva’s scrapped plan to buy back preference shares complied with rules on market abuse.

Aviva said on 8 March it intended to cancel £450m of the high-yielding shares, which were issued by one of its legacy companies in 1992. The shares, described as irredeemable, will not count as regulatory capital after 2026 and cost Aviva £38m in coupon payments. The announcement sent the shares’ value tumbling.

After institutional and retail investors protested and the FCA asked for clarification, Aviva abandoned the plan on 23 March. It said it did so to maintain investor trust.

In a letter to Nicky Morgan, who chairs the House of Commons Treasury committee, FCA chief executive Andrew Bailey said the regulator was reviewing Aviva’s treatment of holders and former holders of the shares who may have lost money.

Bailey said the FCA was not conducting a formal investigation and that it was reviewing whether to hold a full inquiry. He said the FCA’s work was complicated by the length of time since the shares were issued, whether any marketing material still existed and different rules and standards at the time.

Bailey said: “The preference shares in question were issued by the company over two decades ago and, regardless of the intended consumer of the original marketing, have traded on public securities markets ever since then.

“It is possible that much of the investment advice into these products, since they have been traded, would not have originated from the original marketing in 1992 or the prospectuses, but rather it may be that investors have been influenced by or relied on more recent advice or statements or a more general view of the rights of these types of instruments.”