THE FINANCIAL Services Authority yesterday fined hedge fund Greenlight Capital and its owner, David Einhorn, £7.2m for alleged insider trading in connection with a £350m equity raising by Punch Taverns in 2009.
Einhorn’s £3.6m share of the £7.2m fine is the second-largest ever imposed by the UK regulator on an individual for market abuse.
The FSA case hinged on a telephone conversation in June 2009 between Einhorn (pictured above) and Punch Taverns’ chief executive Giles Thorley, Andrew Osborne of Bank of America Merrill Lynch and three others just days ahead of the planned capital raising.
According to sources, Osborne asked Einhorn if he could make him an insider, which would have made him privy to inside information but prevent him from trading in the firm’s securities, but Einhorn refused. There was then some discussion about the matter before the conversation ended.
Within minutes of the conversation closing, according to the FSA, Einhorn, who is well known for shorting Lehman before its collapse, gave instruction for all of his 13.3 per cent shareholding in Punch to be sold.
City A.M. first approached Einhorn’s public relations company in New York, Sard Verbinnen, on Monday to comment on its client’s share dealings in Punch Taverns in 2009. It made no response until yesterday – after the FSA revealed Einhorn had been fined.
Yesterday Einhorn, an outspoken activist shareholder who opposed the Punch Taverns fundraising, said: “We believe that 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 and concentrate on managing our business.”
In a 45 minute conference call last night, an affronted but unapologetic Einhorn accused the FSA of conducting a politically charged process. The FSA “wants to score a win against a high profile US hedge fund”, he said.
He said that not one of the people on the Punch call had said that any inside information had been disclosed. “There was no reason to think I was restricted in any way,” he said.
The FSA’s investigation into Osborne, who quit Bank of America Merrill Lynch in December, is ongoing.