Tesco launches investor compensation scheme for 2014 accounting scandal

Tesco is launching a compensation scheme to reimburse investors affected by its 2014 accounting scandal, but investors will need to make a claim themselves or via their broker.

On 29 August 2014, Tesco issued a trading update about its expected first half 2014/15 profit, an announcement that was later considered "inaccurate", with Tesco issuing a corrective statement almost a month later.

The Financial Conduct Authority decided that Tesco should pay compensation to net purchasers of Tesco shares and bonds in the period from 29 August to 19 September 2014 inclusive, who may have overpaid because of the inaccurate market announcement.

An estimated 10,000 Tesco shareholders are entitled to compensation at the rate of 24.5p per share plus interest of 4% for retail investors, according to Hargreaves Lansdown, one of the brokers that will be working with the company on the scheme.

Investors can claim directly or through their broker, and will receive the same amount of compensation either way.

Compensation should average £400 per investor, Hargreaves calculated, adding that investors should check whether their broker offers help with the claims process.

Investors who want to claim via their broker need to supply their authorisation to their brokers quickly, HL said, in its own caseby noon on Thursday 13 July.

HL's Danny Cox stressed the need for Tescos to "repair" the reputational damage:

"Tesco needs to repair the reputational damage from the accounting scandal and will hope that this compensation scheme will help draw a line under the matter. The claims process is a little clunky but important to follow as it’s a simple equation: no claim, no compensation."