Nottingham Forest docked four points for breaching Premier League financial rules

The Premier League said in a statement that Forest had admitted breaching the profitability and sustainability rules (PSR) threshold of £61 million ($77.5 million) by £34.5 million.

They are the second top-flight team to be penalised for PSR breaches this season after Everton were hit with a 10-point penalty in November, which was reduced to six on appeal.

Everton are still waiting to discover if they will be hit with another points penalty relating to a second charge.

Forest's punishment means they drop into the bottom three, one point behind Luton and four adrift of Everton.

Premier League clubs are usually allowed maximum losses of £105 million over a three-year assessment period but this is reduced by £22 million per season for any seasons within the period spent in the Championship.

Forest were promoted to the Premier League in May 2022, meaning two seasons of their three-year assessment period were as a Championship club.

The two-time European champions had been absent from the English top-flight for the previous 23 years.

But the decision to sign a remarkable 29 players last season, with a reported spend of more than £150 million, has backfired.

Forest's defence centred around the fact they sold Brennan Johnson to Tottenham for a reported £47.5 million just over two months after the end of the accounting period in June 2023.

The club argued they achieved a higher fee for the Welsh international by not selling before June 30.

However, an independent commission found that Forest had to be punished to "maintain the integrity" of the league.

The commission found that Forest had ignored a warning from its finance director ahead of the 2023 January transfer window about breaching PSR and pressed ahead with adding more players to their squad rather than stripping back.

"When a club invests as Forest did to compete in the Premier League, it still needs to comply with the PSR threshold for losses," the commission noted in its written reasons for the decision.

"Such risk-taking and 'sailing close to the wind' needs a proportionate sanction to maintain the integrity of the Premier League."

Forest could appeal the punishment, with the Premier League previously saying the process should "conclude no later than and if possible some time before 24 May", which is five days after the final weekend of the top-flight season.

The club issued a statement in January after they had been charged, saying they were "confident of a speedy and fair resolution".