Regulator probes Benfica unit information disclosure infractions

  • Lusa
  • 20 July 2021

"The events of recent weeks highlight infractions that could endanger the integrity of the capital market and the protection of investors", said the regulator.

Portugal’s Securities Markets Commission (CMVM) is investigating infractions in the disclosure of information to the market and abuse of information linked to the sports management unit of Benfica, the country’s biggest football club, in the context of the arrest of Luís Filipe Vieira, the club’s former president, the regulator has announced.

Vieira was detained last week, along with three other people, as part of an investigation into deals and finance worth some €100 million, according to prosecutors, with losses to the Portuguese state, to the Benfica unit and to Novo Banco. Since then, reports have multiple dof irregularities at Benfica’s quoted sports management company, Sport Lisboa e Benfica – Futebol SAD.

“The events of recent weeks highlight infractions that could endanger the integrity of the capital market and the protection of investors, particularly in the disclosure of information to the market and abuse of information, which will continue to be investigated,” the CMVM said in a statement.

It said that it would continue to “monitor the evolution of any aspect that may result in the need to provide additional information to the market” with the aim of ensuring the integrity of the functioning of the market, in defence of investors.

“After evidence of various irregularities became public knowledge that could affect Sport Lisboa e Benfica – Futebol SAD (Benfica SAD), impact its corporate governance and create opacity about the composition of its shareholder structure, the CMVM took steps to ensure that the interested parties ensured that all relevant information of which they were aware was made available to the market, in order to guarantee minimum conditions for the negotiability of securities,” the statement reads.

“Following this, qualified holdings announcements were published, reflecting the available information on the nature and extent of relations between shareholders, and between shareholders and third parties, as well as privileged information announcements, based on the issuer’s judgement on the relevance of the information to be made available to investors,” it continues.

The CMVM notes that these events emerged after the approval of a prospectus relating to a public offering for subscription of bonds issued by the Benfica SAD, currently underway, that aims to raise up to €35 million, of which the regulator states that, “due to the same [revelations], its content became non-compliant with the quality of information requirements applicable” in Portugal.

As a result, it goes on, “after minimally stabilising the immediate implications of these indications, an addendum to the prospectus was approved by the CMVM, which reflects the information available at the time.”

The regulator stresses that its intervention, in the form of the approval of an addendum, “is based on an evaluation of the requirements of completeness, veracity, timeliness, clarity, objectivity and lawfulness of the information that the issuer must make available to investors, in light of the information available, without however implying an assessment of the economic or financial situation of the issuer or the viability of the offer.”

It adds that “investors must adequately weigh, against the information contained in the prospectus and the addendum, the investment opportunity offered, as well as their willingness to bear, in an adverse scenario, the risks inherent to this offer, as in any other investment.”

At the same time, the CMVM stresses that “the definition of the shareholder structure of a company issuing securities admitted to trading on the market, as well as the specific composition of its governing bodies, is not dependent on any prior act of an authorising nature and so “it is up to the investors, and in particular the current shareholders of Benfica SAD, to undertake the evaluation and corporate acts that they deem appropriate based on the information that should be made available by the issuer.”

Vieira, who resigned at the weekend, is currently under house arrest pending the posting of bail of €3 million and is barred from leaving the country or contacting to other three detainees. He is suspected by prosecutors of abuse of trust, qualified swindle, forgery of documents, money laundering, tax fraud and abuse of information.

According to public prosecutosrs, the actions of Vieira and others caused losses to Novo Banco of at least €45.6 million that was underwritten by the banking sector Resolution Fund, to which the state has lent billions of euros.

As part of the same Operation Red Card, Vieira’s son Tiago, football agent and lawyer Bruno Macedo, and businessman José António dos Santos were also detained on suspicion of swindling, forgery of documents, money laundering and tax fraud.