Shine sizes up EML Payments legal action over Irish regulation disclosure

Central Bank of Ireland.

Shine Justice (ASX: SHJ) is weighing up taking legal action against fintech EML Payments (ASX: EML) over its handling of the disclosure of a letter from the Central Bank of Ireland, whose contents sparked a 46 per cent dive in the share price on Wednesday, 19 May.

On Monday, 17 May the company called a trading halt before the market opened, reporting its subsidiary PFS Card Services (Ireland) Limited had received a letter containing "significant regulatory concerns".

At the time EML claimed it had received the letter on Friday, 14 May (Australian time), although in a later clarification to the ASX it noted the Irish subsidiary actually received the letter at 11:12pm on Thursday evening, 13 May (Australian time), following a call with senior managers at the regulator.

This means EML shares were trading for one full day whilst senior executives possessed the information but it was not disclosed. On that day the share price fell by less than one per cent.

Prior to lifting the trading halt on the Wednesday, EML then revealed the full scope of the concerns including anti-money laundering and counter-terrorism financing (AML/CTF) matters, risk, control frameworks and governance.

As part of its investigation into these issues, the Irish Central Bank could potentially restrict the subsidiary which contributes more than a quarter of EML's global revenue.

Shine Lawyers believes the market should have been notified sooner, alleging EML failed to immediately notify the market of regulatory and governance issues affecting PFS.

Shine's class actions practice leader Joshua Aylward says the firm is investigating whether EML's delayed response to the letter breached continuous disclosure laws.

"EML did not request a trading halt for almost four days after learning of these concerns and then took another 48 hours to inform the market," Aylward says.

Aylward says the firm's investigation will also consider whether EML engaged in misleading or deceptive conduct.

"When shareholders invest their money into a company, they do so with the belief that that company will comply with its continuous disclosure obligations," Aylward says.

"Our claim will allege that EML failed in its obligations, significantly impacting share prices for thousands of investors.

"Investors who purchased shares between 19 December 2020 to 17 May 2021 are encouraged to register their interest on our website for this class action."

Analysts have predicted volatility over the next month as investigations into PFS continue.

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