On 17 October 2017, the FCA issued a Press Release announcing that it has fined Rio Tinto plc £27,385,400 for breaching the Disclosure and Transparency Rules (now the Disclosure Guidance and Transparency Rules) (DTRs). Rio Tinto plc had agreed to settle at an early stage and therefore qualified for a 30% reduction in penalty, without which the penalty would have been £39,122,007.
Contrary to DTR 4.2.4R(1), Rio Tinto plc failed to carry out an impairment test (as required under IAS 34) and recognise an impairment loss on the value of mining assets (as required under IAS 36) acquired in August 2011 when publishing its 2012 interim results meaning that those results were inaccurate and misleading. Rio Tinto plc had decided that it would continue to value the mining assets at the acquisition price because of lack of clarity as to its mine development plans - this decision was despite indications that the value of the assets was negative. The FCA considered that this demonstrated a serious lack of judgment and by failing to act on the signs that an impairment assessment was required, Rio Tinto plc had, contrary to DTR 1.3.4R, failed to take all reasonable care to ensure that information in its 2012 interim reporting was not misleading. It was not until January 2013 that Rio Tinto plc announced an impairment of the relevant assets.
Mark Steward, Executive Director of Enforcement and Market Oversight in the FCA said that “…Reflecting the size of the company, this is the largest fine imposed to date by the FCA for a breach of rules relating to a firm’s official listing and demonstrates how vitally important high standards of disclosure and transparency are to ensuring our markets function fairly and effectively”.
In addition, also on 17 October 2017, the SEC issued a Press Release announcing that it has charged Rio Tinto plc and two former top executives with fraud for inflating the value of these assets. The Australian Securities and Investments Commission is also looking into the matter although it has not announced any action as yet.