Birmingham City’s transfer embargo has been lifted but the club will only be able to sign up to five new players under EFL restrictions.
Birmingham recorded losses in excess of the permitted amounts for the three-year period 2015/16 to 2017/18, the EFL said.
The club will now be referred to a Disciplinary Commission which has the power to invoke a full range of sanctions if the club are found in breach of Financial Fair Play rules.
Clubs cannot exceed losses of £39m over a three-year period or they will face penalties from the governing body.
Birmingham have agreed to adhere to an EFL transfer plan, saying on Thursday the objective is to “move the club towards compliance for forthcoming reporting periods”.
Paying the price?
Birmingham signed 14 players in last summer’s transfer window under then-manager Harry Redknapp.
EFL chief executive Shaun Harvey said on Wednesday “we are hoping to help the club through this”, insisting the governing body is “not about restricting activity”.
In a statement released on Thursday, the EFL said it was “exceptionally disappointed” that Birmingham signed Denmark under-21 international Kristian Pedersen despite being aware they would be subject to punishments if in breach of permitted losses.
Birmingham have been permitted to register Pedersen, plus a further five additions if required.
Any players signed will be subject to a number of conditions, including a wage cap.
Pederson, signed for around £2m from German side Union Berlin, will be available to play against Norwich on Saturday.
The EFL said its decision to allow Pedersen to play was taken “after consideration of the legal position as between the club, player and the EFL”.
The club were then under a ‘soft embargo’, designed to allow the club to make changes in order to prevent potential failure.
The Disciplinary Commission will hear representations from both Birmingham and the EFL before deciding whether the club’s losses broke FFP rules.
Possible sanctions could include points deductions and further transfer embargoes.