Full marks to the City authorities for promptly nailing one of the most egregious examples of shareholder abuse in recent memory. But a gamma minus for then punishing the victims rather than the perpetrators.

The failure by the directors of Entertainment Rights to alert shareholders to a catastrophic loss of business was disgraceful. The media company behind Postman Pat took 78 days to deliver that particular packet of bad news.

The rules aren’t that precise, of course. Directors are obliged to divulge inside information only if they expect it to have a “significant” effect on the share price. Some decisions are borderline. This one wasn’t. The directors knew the watering down of the terms of a key contract would hit profits by $13.9 million. That was equivalent to roughly the group’s entire pretax profits. The excuse that they hoped to make up the shortfall with other contract wins was as lame as a gag from Basil Brush, another of its properties.

So the Financial Services Authority was right to tackle this case. Unfortunately, it decided against pursuing the individual directors and instead fined the company.

Investors unlucky enough to buy shares in the late summer of 2008 at an artificially inflated price have therefore been doubly punished, indirectly having to shoulder a £245,000 fine. ER is on its knees. The fine could tip just tip it over the edge.

The FSA should have gone after the directors responsible, not the company. The deterrent effect would have been immeasurably greater. Directors would be much less tempted to conceal bad news if they knew it might hit them in the pocket.

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