TalkTalk was accused of "blatant disregard" of City guidelines after it was forced to seek a £200m cash injection to pay down heavy debts.
The Investment Association (IA), which represents most of Britain's biggest investors, attacked the operator for raising the money via a share placing without the approval of existing shareholders. TalkTalk placed new shares equivalent to a fifth of its stock market value, in breach of industry guidelines that set the limit at a tenth.
A spokesman for the IA said TalkTalk had violated shareholder rights that are "a vital shareholder protection and their misuse poses a serious threat to shareholder and investors’ interests – the UK’s pensioners and savers".
"Businesses have a duty to listen to their shareholders and this placing sets a very damaging precedent for market practices."
TalkTalk carried out the placing of new equity alongside a stinging profit warning and its second dividend cut in less than a year.
The company’s shares sank to a record low on the latest in a series of downgrades but chairman Sir Charles Dunstone, who reassumed executive responsibilities last year, was defiant.
He said: “We’ve had one reset and it ended today. You talk to analysts and people who view the whole world through Excel but in nine months we’ve achieved a phenomenal amount and we’re growing. We’re now fixing the balance sheet.”