Tesco fined £129m for overstating profits

The agreement needs to be approved by a crown court at a public hearing on 10 April.

Tesco said the DPA was the subject of a preliminary court ruling on Monday.

The SFO said the DPA did not address whether liability could be attached to Tesco or any of its employees or agents.

The irregularities in Tesco's accounts related to revenue recognition issues linked to the way in which income from deals with suppliers was booked by the retailer.

The supermarket group has struck a so-called deferred prosecution agreement (DPA) with Britain's Serious Fraud Office (SFO), enabling it to avoid a criminal conviction provided it meets certain conditions and pays the financial penalty.

Under an agreement with the FCA for a market abuse charge related to the company's trading statement on August 29, 2014 due to the same scandal, Tesco will set up a compensation programme to certain purchasers of shares and listed bonds between August 19, 2014 and September 19, 2014.

Despite the compensation agreement, Tesco said the FCA had "expressly stated" that it was not suggesting the Tesco board of directors "knew, or could reasonably be expected to have known" that information in the trading statement was false or misleading.

As part of the agreement, Tesco will establish a compensation scheme for investors who bought shares or bonds for cash between August 29, 2014, and September 19, 2014, giving 24.5 pence per share plus varying rates of interest depending on whether the investor was institutional or retail.

The compensation bill was estimated by the Financial Conduct Authority at £85m.

The compensation scheme is set to launch by the end of August this year.

It said each net buyer of shares over the period will be entitled to 24.5p per share purchased, alongside interest of 1.25% per year if the buyer is an institutional investor and 4% per year if the buyer is a retail investor.

'The FCA is committed to United Kingdom markets being fair, transparent and thus competitive. The FCA is not fining Tesco and the board have been cleared.

"We believe that Dave Lewis engaged in corporate wonders in keeping Tesco stable at the time of this crisis and all shareholders should be thankful for his skills in navigating the business through the most choppy of waters", they continued.

This is the first time the FCA has used its powers to require a listed company to pay compensation for market abuse.

Chief executive Dave Lewis, who uncovered the scandal on arriving at Tesco, Tesco, said the company had co-operated fully with the FCA and SFO. This will be booked as an adjusting post balance sheet event in 2016/17.

  • Zachary Reyes