Telecoms equipment group Marconi was yesterday criticised by the City watchdog over its handling of the profits warning that sent its shares into freefall.

The Financial Services Authority (FSA) said Marconi breached market rules in July 2001 by failing to release price sensitive information immediately. But the FSA was only able to issue a public censure because it did not assume powers for such matters until five months after it took place.

The inquiry criticises Marconi's former management team, which included chairman Sir Roger Hurn and chief executive Lord Simpson, for suspending shares for a day rather than issuing a trading statement at the same time as announcing the sale of its medical systems business.

The report showed directors had delayed in order to study further trading figures but the FSA said the company should have released the information it had at least a day earlier on July 3, 2001.

When the stock did return to the market, shares slumped 54 per cent and trading volumes rose 25-fold following the profits warning.

The update shattered investor confidence and proved a key moment in the company's slump towards a debt-for-equity swap that will soon leave shareholders with virtually nothing.

FSA managing director Carol Sergeant said: "We require companies to keep the market informed of price sensitive information without delay so that investors can be sure they are making financial decisions based on the most up-to-date information."