New Fines in Greenlight Capital Insider Trading Case

The insider trading case involving David Einhorn’s Greenlight Capital and its trading of Punch Taverns before the company announced its fundraising is continuing to draw more fines. Friday, Britain’s financial regulator said ” that it had fined a former Greenlight Capital compliance officer and a JPMorgan Cazenove trader in connection with Greenlight’s sale of shares in a British pub operator more than two years ago,” writes the New York Times. “The Financial Services Authority (FSA) said Alexander E. Ten-Holter, Greenlight’s former compliance officer, was fined £130,000, or $204,000, for failing to ensure that an order to sell shares was not based on inside information.” The FSA “also fined Caspar J.W. Agnew, a trading desk director at JPMorgan Cazenove, £65,000 pounds for not identifying that the sale order could be suspicious and for not reporting it to his employer.”

Ten-Holter and Agnew are only the most recent to be fined by the FSA. The FSA is also seeking to fine Andrew Osborne, a former Bank of America Merrill Lynch broker about £350,000 for his role in the Einhorn-Punch trading.

Osborne, who resigned from the bank last year, is considering whether to appeal the fine. And, of course, the FSA had ordered Einhorn to pay £7.2 million (roughly $11.2 million), including a £3.7 million fine, over the questionable trade (read the story here). Einhorn said that he agreed to the fine “rather than continue an arduous fight.” He said that his fund would not seek further litigation and explaining that he doubts his “chances of having a fair hearing.”

That said, Einhorn very clear that he does not believe his actions to be anywhere close to insider trading (read his story here), saying “this resembles insider dealing as much as soccer resembles football.” Einhorn said that he had never signed a non-disclosure agreement (NDA) with the company, even going so far as to tell the company he would be  “happy to talk to management, but not interested in receiving information to trade stock.” When Einhorn learned in what he describes as an “open, unrestricted” phone call with Punch’s CEO in which the CEO told him the company had sold 11 of its pubs that morning and was considering “strategic options” like raising equity, he made a decision to sell his Punch Taverns stock. “I thought it was a terrible idea,” said Einhorn adding, “I said it was a lousy deal for Greenlight and shareholders such as Greenlight.” The hedge fund was able to sell roughly one-third of its shares in Punch before the company announced its equity fundraising, a move that reduced Greenlight’s 13.3% stake in Punch to a stake worth 8.9% of the company, and, in doing so, avoided “£5.8 million in losses.” Einhorn said that he did not believe he violated market abuse rules and that he believes he did nothing wrong  The FSA ruled that it “was inside information and Einhorn should have appreciated this.”