Things appear to be going from bad to worse for identity theft and credit card insurer CPP, which last week lost the Barclaycard contract and which has been rocked by demands by the City watchdog, the Financial Services Authority (FSA).
Trading in the company's shares has been suspended while CPP, at the FSA's behest, undertakes a review of certain past business sales and makes various changes to its renewals process. The request comes as a result of the FSA's findings into CPP's sales practices.
CPP is not happy about the FSA's request. Though it has acknowledged that a review in to past business practices is appropriate, the board of CPP thinks the FSA's intervention is disproportionate and threatens the viability of the business.
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After the loss of the Barclaycard contract last week, Peel Hunt analyst Henry Carver was among those to link the decision to the FSA investigation. "The risk of further business partners ceasing their relationship with CPP remains very high, overshadowing forecasts," Carver said.
The FSA is adamant that some form of customer review exercise will be required, with the results thereafter discussed with the regulatory body. The FSA has indicated that such discussions are likely to continue for no longer than two weeks.
There is no certainty that these discussions will be resolved or what the scope of any review exercise that might be acceptable to both FSA and CPP might be, CPP notes, though CPP believes that any agreed outcome is likely to have "a significant adverse impact" on CPP.
CPP is currently unable to assess accurately its financial position and inform the market accordingly, and as such considers an immediate suspension of trading to be appropriate.
Shares in CPP were trading at 103p prior to suspension, 5p above their 52-week low and almost exactly two-thirds below their 52-week high.
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