Osborne Fined in NSA Insider Trading Query Over Einhorn Deal

The chapter of the FSA’s insider trading fines against Greenlight Capital‘s David Einhorn over his sale of Punch Taverns stock may be over – Einhorn agreed to pay the fine – but it seems the FSA has yet to lay the matter to rest. According to the Financial Times, “UK regulators are seeking to fine a former Bank of America Merrill Lynch broker about £350,000 for his role in hedge fund manager David Einhorn’s improper trading ahead of the 2009 equity raising by Punch Taverns.”

“Andrew Osborne, who resigned from the bank late last year, is considering whether to appeal against the fine to a tribunal,” writes the Financial Times. “People familiar with his views said Mr Osborne, who served as corporate broker for the UK pubs company, consulted lawyers throughout his June 2009 interactions with Mr Einhorn and does not believe he gave the hedge fund executive inside information.”

The Financial Times also writes that “the FSA is also seeking to fine a bank that failed to flag Greenlight’s share sales as potentially problematic.” It explains, “Under UK law, institutions are supposed to file a ‘suspicious transaction report’ if they are involved in a transaction that appears to be unusually lucky in its timing.” The Financial Times reports that “that investigation is said to be close to a settlement.”

The FSA said that Einhorn learned on June 9, 2009, from a broker working for Punch, that the company was near an equity fundraising (read about it here). In response, Greenlight went from owning a 13.3% stake in Punch to a stake worth 8.9% of the company, and, in doing so, avoided £5.8 million in losses after Punch announced its fundraising on June 15. Einhorn defended his actions saying that he did not believe he was violating market abuse rules and that he still believes he did nothing wrong (read his side of the story here). The FSA said that the Punch tip “was inside information and Einhorn should have appreciated this,” and ordered Einhorn to pay £7.2 million (US$11.2 million), including a £3.7 million fine. Einhorn said when the fine was announced,“We believe this action is unjust and inconsistent with the law and with prior FSA enforcement precedent. However, rather than continue an arduous fight, we have decided to put this matter behind us.”