The Financial Conduct Authority is examining M&C Saatchi’s accounting scandal, according to a story in the Financial Times.
The newspaper has reported that the escalating crisis at the UK arm of the agency – something that has resulted in an £11.6m "adjustment" over two years, a plummeting share price, the loss of the NatWest ad account and a board exodus – has sparked a request for information from the financial watchdog.
While the move is preliminary and does not necessarily presage a formal investigation, the FCA – a client of M&C Saatchi – is empowered to fully investigate a company and prosecute if it has transgressed financial conduct regulations.
According to an unnamed source cited in the report, such inquiries are considered "routine" in the wake of large-scale corporate announcements around accounting mistakes.
M&C Saatchi’s share price, which was near £4 in March, has fallen three-quarters this year, dropping to 79p last week when the company admitted that its accounting "misstatements" that first came to light in August were worse than expected.
But the agency’s fortunes appear to be worsening, with news that Maurice Saatchi, one of its co-founders, has parted ways with fellow founding partners David Kershaw, Jeremy Sinclair and Bill Muirhead.
Lord Saatchi resigned as executive director, alongside the three independent non-executive directors, Sir Michael Peat, Michael Dobbs and Lorna Tilbian. The directors had disagreed with the manner in which the accounting scandal was being handled and questioned whether Kershaw should remain as chief executive.
Earlier this week, worldwide chief executive Moray MacLennan sought to reassure staff and clients, telling employees in an internal memo that the underlying business is sound and that it would "emerge stronger" from the crisis.
Neither M&C Saatchi nor the FCA have responded to Campaign at the time of writing.