Championship Watford have been placed under transfer embargo and former owner Laurence Bassini banned from football for three years for financial misconduct.
However, the promotion-chasing club escaped a points deduction and fine.
Under the terms of the embargo, Watford can still sign players with prior permission from league officials.
The embargo will last until the end of the summer transfer window on 31 August.
"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," read a club statement.