Britain’s financial watchdog has launched an investigation into advertising group M&C Saatchi, following previously disclosed accounting problems that have led its share price to tumble more than two-thirds since the summer.

M&C on Friday said the Financial Conduct Authority, which has the power to fine and criminally prosecute any breaches of its market-cleanliness rules, had launched a full investigation into the company following “accounting adjustments [ . . .] and the completion of an independent forensic review commissioned by the board”.

The group said it would “co-operate fully” with the investigation, which comes after the FCA’s Markets Oversight Team, which polices the accuracy and timeliness of publicly traded companies’ statements to the market, began scrutinising it in December.

The watchdog’s move indicates it has found something amiss in M&C’s accounting disclosures, ramping up pressure on the company, which has been propelled into its worst crisis since it was founded in 1995.

M&C, which counts the FCA as a client, has made three statements to the market since the accounting issues were identified. Executives have told colleagues they are confident the disclosures were made in a full and timely manner.

The first, in August, announced a £6.4m “one-off charge” relating to misapplied accounting rules, including £2.6m of overstated revenues and an understatement of costs of £3.1m. At the time, M&C said it believed it had “discovered the full extent of the issues” but had brought in PwC to run an external review to make “doubly sure”.

When announcing its interim results in September, the advertising group said the PwC review indicated results for previous years would need to be restated. Chief executive David Kershaw said he was pleased the company was moving out of “intensive care”, but a profit warning issued at the same time knocked the M&C share price by 10 per cent.

The most recent trading update in December prompted a 46 per cent fall in M&C shares, the biggest since its 2004 listing. The company issued a second profit warning and increased the estimated accounting errors to £11.6m, spread over its 2018 and 2019 financial results. It also noted the misapplication of accounting rules could stretch back five years.

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