Watford have avoided a points deduction or a fine but former owner Laurence Bassini has been banned from any football involvement for three years after both parties were found to have breached Football League regulations.
An independent Football Disciplinary Commission has been investigating events concerning the npower Championship club, with the alleged misconduct charges arising from the handling of two financial transactions in 2011 which occurred during Bassini's tenure as owner and director.
Bassini departed Vicarage Road in June 2012 having sold the Hornets to the Pozzo family.
The Hertfordshire outfit have this season sustained a serious bid for promotion to the Barclays Premier League and are currently third in the npower Championship table, just two points off the automatic promotion places, safe in the knowledge they have not received a points deduction.
They have, however, been hit with a transfer embargo of sorts, which still allows them to buy and sell players but only with prior authorisation of football authorities.
A statement on the Football League website read: "A Football Disciplinary Commission, in the case of The Football League vs Watford Football Club and Mr Laurence Bassini, has determined that both defendants breached Football League regulations regarding the securitisation of future transfer fees and central distributions."
A further club statement on Watford's official website read: "Following the publication today of the independent Football Disciplinary Commission's judgement, Watford FC is pleased to confirm that it has not received a points deduction or a fine.
"Former owner and director Mr Laurence Bassini has been banned from any participation in football for three years. The club has been made the subject of a transfer embargo, but wishes to emphasise that the embargo referred to falls under Regulation 19 of the Football League Regulations.
"This is not an absolute bar on transfers, but rather a mechanism by which transfer business can be conducted by the club provided that the prior authorisation of the relevant football authorities has been obtained.
"It is clear from the decision of the Football Disciplinary Commission that the offences which the club has been found guilty of were committed by one or two individuals who are no longer associated with the club - and without the knowledge of the full board of the club."