Pcf Share Discussion Threads

[cc2014] 07/8/2021 07:46

Should the Board have noticed what was going on with the dodgy transactions? Here's my take.

The audit committee and the Board would have been provided a copy of the quarterly PRA return. The audit committee would/should have had some form of reconciliation of the PRA return to what's in the accounts. The Board would probably not have had the reconciliation and taken assurance from the audit committee.

Likewise the audit committee would have had enough information to assure the books for Sept 19 were correct whilst the Board would have again relied on the audit committee to some extent.


What appears to have happenned is that in Dec 18, Apr 19 and June 19 the books and PRA returns did not match but by the time we got to Sep 19 which is the year end date this was no longer taking place. (albeit it appears some transactions were still not supported by legal assignment in Oct 19 after year end but presumably should have been).

This kind of excuses the auditors as their remit is mostly to ensure the year end position is correct and that was the case.

But what about the audit committee? They would have looked at each quarterly return. The clue would have been that the lending to Azule did not match the PRA return and the only way you would have spotted that is by looking at the actual intercompany receivables, which is intercompany. It's not something that probably gets lots of attention because it is intercompany. Out of all the risk the audit committee has to look at, it's not going to be high on the list.
On the other hand Azule is new to PCF and should have got special attention from the audit committee.

I cannot make my mind up whether they should have spotted it. I think a high performing audit committee would. The problem is that this wasn't a mistake, it was deliberate fudging of the figures under instruction by a number of staff. Collusion is much harder to spot.


On the other hand this demonstrates a complete breakdown in the Board, the finance team and the whistleblowing policy and that's really the issue. Any Board should never have allowed the circumstances to occur or continue where this could happen. This for me far outweighs the actual act of whether they should have spotted the erros.



This is worth repeating:
In addition, the Independent Review has enabled the Board and the executive management team to identify a number of deficiencies and failures in PCF Bank's financial control and reporting function, including members of the finance team, under instruction, manually adjusting certain accounting entries for both financial and regulatory reporting purposes which appear to the Board to have been a deliberate effort to facilitate specific results or compliance with rules regarding Large Exposure limits. Based on the findings of the Independent Review, the Board believes that these matters may be driven by possible collusion by some members of the finance team, under resourcing, an inadequate level of skill and experience within the finance team, technological limitations and a poor culture in the finance team resulting in a lack of, and a reluctance to, challenge its leadership.



To cut to the chase where are we now? Because that's the part we are all interested in. They owned up to the dodgy transactions in May 2021, which in any event didn't affect either the Sept 19 or Sept 20 accounts. The Large exposure limit was last breached in June 19, now 2 years ago.

So, what's the hold-up? We've not been told about any further problem transactions, indeed one RNS said nothing was impacted except for the additional costs associated with reviewing all this and additional on-going costs to beef up the finance team and governance.

The hold-up is the forensic review of the accounts and the PRA remediation, but resolution of the accounts shouldn't be taking this long.

[the millipede] 06/8/2021 21:47

What a brilliant insight! Thanks dandigirl.

[dandigirl] 06/8/2021 15:30

Ultimately, Directors are dependent on information produced by the Executive. If they wish to cook the books, generally it can be gotten away with for a period of time but it always surfaces eventually.

Failure to report accurately and to time is a heinous crime to the regulators.

However, a NED/the NEDs can improve the chances of finding out if things are not right.

Because of capital constraints, internal limits should be a topic of discussion at every ARC Meeting. Especially in small banks, like PCF, limits are always in need of tweaking to ensure that the figures remain on the right side. Azule, in particular, should have had close questioning of SM and RM, in particular. If they mis-led at several meetings then they must accept whatever is coming their way. After all, the timing of the purchase of Azule was most unfortunate and its performance through the past months should have warranted a separate discussion at every meeting. Surely there would have been a trend.

Whistleblowing policy and procedures. Make sure these are in place. Even as NEDs we have ongoing training and annual refreshers which include the policy and procedures for whistleblowing. Not only make sure one is in place but that it includes access for all staff to at least one NED. Also make sure that the Head of Compliance signs off that all staff are tested on the policy annually. I find it hard to believe that at least one of the group involved in this did not feel uncomfortable with what they were being asked to do.

On the occasion of meetings in the office, wander around, chat to people, make yourself accessible, in a low-key way leave a card with home number and personal mobile and drop into the conversation that you are always available should they see or feel uncomfortable about anything. Accepted that this is impossible to do in view of COVID but connections could have been made pre-pandemic in this case.

I do think that much closer scrutiny of the numbers in general and the performance of Azule in particular would have brought this to light sooner. So, yes, I do think it should have been spotted sooner.

However, this looks to me to be something much more significant. Azule was purchased late 2018. The business volumes cannot be that many since then. Time enough to examine every one in detail in the last few months.

So what else is there that we are not being told? Whatever it is, I put it on Franklin and the Board. Moreover, given that the shares are already suspended, it should be possible to enlighten us somewhat. After all, we have to be informed eventually.

[the millipede] 06/8/2021 11:44

dandi - I agree CC's posts are helpful, as are others.

Out of interest, based on your experience as a bank NED, do you think the directors should have spotted the problems sooner?

Do directors have any way to check/verify the numbers, independently of the reports the FD gives you?

[dandigirl] 06/8/2021 10:04

CC: your posts are fine.

We appear to be on a similar wavelength.

I have experience of being a bank NED and if I were one at PCF I would be making it clear to Franklin that the RNSs are not good enough and if they are not improved, I would resign.

As a Board led by Franklin they are all just too terrible.

And when all this has passed, if I were Somers they would all depart the scene gradually - first Franklin, second Morgan, then the Chair of the AC followed by the others.

The shame of it is there is a demand for PCF’s products. The market is vibrant.

Next week watch out for figures from SUS, a similar organisation run by Anthony Coombs and with the family having a large shareholding. I think we will see improving figures. SUS will be doing good business while PCF continues with its self induced distractions. We are shareholders too in this well run business.

[cc2014] 06/8/2021 08:33

I re-read my post this morning. I went a bit over the top. My apologies.

What I was trying to get over is that by any normal standards of shareholder communication in similar situations the Board are failing to meet that standard. Further, I feel the bar should be set higher than "normal" because PCF is a regulated bank.

This worries me because the Board should not be operating in this way and by association I wonder whether the Board make good decisions in relation to other matters.

They have decided they do not have to keep shareholders up to date or if you prefer no longer see themseleves accountable to the 35%. At least that is the interpretation I take from it. The trouble is it's exactly the same attitude the accounts team took when they decided to fudge the regulatory numbers. In that case the accounts team (+Scott?) decided they were not accoutable to the Board or the Regulator. In both cases there was no or insufficient scrutiny.


I am concerned this is Somers exerting their influence over the Board, which raises other questions about integrity of the Board. Regrettably this is one of the reasons companies with large major shareholders trade at a discount and something I should have paid far more attention too (as should Simon Thompson at IC)

[cc2014] 05/8/2021 20:39

I have been investing in the stock market for very many years...

I don't think I've ever seen a situation where a company which cannot produce it's interim or final accounts on time has not informed the market a week in advance. Most often the warning comes about a month in advance. Sometimes the statement says they hope to get it done but aren't 100% sure and thus the warning.

The nomad/house broker will have told them this is normal.

Sure, I'm sure someone will pop up and quote an example where this has not happenned but I'd be prepared to bet on those occasions it has turned out extremely badly for shareholders. (and I don't think PCF is that sort of basket case)

Further, PCF isn't some small start up tech company making something intangile we can't really grasp, it's a bank, a bank regulated by the PRA. Which means there is even less excuse for the lack of warning over missed reporting deadlines.

The Board's actions by not keeping the market informed shows the poor governance that is going on here which presumeably contributes to why they are in this mess in the first place.


I fully agree with everything written in post 3239. When you think about it Somers who own 65% of the shares are fully informed of the situation as they sit on the Board. Why is it they get to know but the other 35% don't?


I think we all probably agree Franklin and the Board aren't required to blab every detail about whatever the mess is, but it's not unreasonable to give an outline of the timeline. Being forced to produce an RNS because your email box and phone line has exploded isn't the way to go about things.

[dandigirl] 05/8/2021 20:05

hippo: You miss the point, as usual.

It should be possible for Franklin, his Board and all the highly paid advisors which all shareholders are paying for to come up with a form of words that gives the uninformed 35% a clue as to what is unfolding and a guide as to how much longer it may take.

The latest RNS tells us nothing. You appear to be content to accept that. Okay, that’s your prerogative. I am not happy to accept that he cannot enlighten us. That’s mine.

It’s like Franklin is saying to us: You want an RNS, well here it is, and I am telling you nothing. He rubs salt in the wounds by thanking us for our patience and support as if we have a choice. No, Franklin, I am impatient and I do not support you. The sooner the better you are gone. You and your Board failed to provide adequate corporate governance and your failures continue.

Franklin is showing huge disrespect to the 35%. Somers will know what is going on. Franklin needs reminding that he is Chairman for all shareholders not just for the Somers group and he should be doing much better for all of us.

Of course, he can add to our knowledge especially given that the shares are suspended.He has chosen not to. That’s the point. I do not just accept that there is nothing to add when there clearly is.

[the millipede] 05/8/2021 17:33

"Whats the point in making a statement when there is nothing to add?"

Good question. On the basis that they were unable to provide any timescales, my takeaway from this week's announcement is that there will be nothing further for some time.

[georgelees] 05/8/2021 12:27

I am a concerned shareholder. I was quite a fan of Scot Maybury, I thought he seemed quite down to earth and no nonsense. This is a real shame.

Does anyone have a guess how long an audit should take from scratch? Tightening up procedures and oversight can not be that complicated?

I rather fear something else. I doubt there was anything very seriously wrong with the accounts, but it may have grown to quickly for the systems? What I wonder is that once they get into the compliance and reporting mindset and walking across PRA eggshells the life will gradually be sucked out of them. The new Finance Director looks very qualified but if your experience is in compliance, they might end up doing so much compliance that the business is complianced to death and there is nothing left to comply.

Anyway, I see no harm in saying what is going on, build some trust and the shares are suspended. I.e what are they doing? Rebuilding IT systems? Going through all the accounts? Have they found anything smelly? I doubt it but a rough time frame would be reassuring.

[seasidehippo] 05/8/2021 08:18

I am in disagreement. Whats the point in making a statement when there is nothing to add?

[cc2014] 04/8/2021 10:40

I am in agreement Dandigirl. I would go further. There are 5 non-execs in addition to Franklin and of course the execs.

How can a majority of them feel this is the right way to approach the situation? Someone else used the word incomprehensable. I agree.

[dandigirl] 04/8/2021 10:13

The more I think about this latest RNS the more I think Franklin continues to show contempt for the 35%.Despicable person.

[hopespr1ngseternal] 03/8/2021 13:07

Why they couldn’t release this on Friday is beyond comprehension. FYI I tried to call Tavistock yesterday but there was no answer. I also rang the company and was told by Gavin that someone called Eliza Anderson would ring me back. She did not do so.

[cc2014] 03/8/2021 09:33

RNS should have been issued Friday. I guess a whole load of enquiries came in yesterday thus the RNS today.

[dandigirl] 03/8/2021 08:32

If only we could sell. (I would put a smiley face here, if I could)!

[graham1ty] 03/8/2021 07:45

Well, that adds nothing to the sum of human knowledge. And anyone that uses “workstreams” has got to be a Sell !!

[seasidehippo] 03/8/2021 07:38

Well you asked for an RNS and you got one. At least this confirms there is still a pulse!!

[hopespr1ngseternal] 02/8/2021 18:15

The new broom was appointed on 19th March 2021. Within 2 months she had identified that the stables were Augean and needed cleaning. About a month later the company issued a fairly comprehensive update. I wish the Board were more communicative but as others have pointed out there is nothing that we as shareholders can do. An RNS stating that the review is ongoing and that the company cannot yet give a date for the 2020 accounts would not go far towards soothing my nerves.

[cc2014] 02/8/2021 16:41

It's the same broom. The broom has been in post for soem time. I'm sure someone will look it up.

I would suggest the PRA are holding the handle of the broom.

[hopespr1ngseternal] 02/8/2021 14:34

I think this is much more than a normal audit as it includes a full review of financial controls. Note it is PWC who are conducting the review not the auditors EY. Note also that ‘while the PCF Group continues its work in relation to the remediation plan on the financial controls environment described above the shares will remain suspended.’ Major house clean by new broom.

[graham1ty] 02/8/2021 14:22

Yes, a full audit takes a while, however, the audit started in about January, if not before ( the results, as first stated, were December) As soon as first delay, auditors sit up and take a bit more seriously. Next delay, auditors antenna twitching. First announcement ( thee months now) and auditors on red alert, and going overthing with fine toothcomb. And if that started coming up to three months ago, should not be taking this long.

Yes, new FD, yes, independent investigations, yes, looking at systems, but the audit is on one level pretty simple: deposit book. And loan book.

Yes, impairments and forbearance, provisions and write offs and IFRS9 then get complicated. RNS does not refer to impairments and their treatment being the issue.....

Who knows.....

[hopespr1ngseternal] 02/8/2021 14:20

'Once there is greater certainty over the timing of the publication of the annual report and accounts PCF will provide an update accordingly'

I think we have to take the company at its word, i.e there will be no RNS until there is some certainty about the timing of the 2020 financial statements.

[the millipede] 02/8/2021 14:20

In fact (thinking aloud) could it be the suspension happened because the requirements of a stock market listing might conflict with the requirements of any legal proceedings?

[the millipede] 02/8/2021 14:16

Were they deliberate irregularities at NMCN?

What has happened here, one assumes, might well lead to proceedings brought against employees.

We have been told it is very much a case of deliberate falsifications, not incompetence.

Could this limit what PCF can tell us?

(I am guessing really and clearly hoping for a positive outcome).