Wednesday, 27 July 2016
Last updated 23 min ago
Jan 25 2012 | 1:52pm ET
British regulators today fined Greenlight Capital founder David Einhorn for insider-trading.
The Financial Services Authority ordered Einhorn to pay £7.2 million (US$11.2 million), including a £3.7 million fine. The agency said that Einhorn ordered Greenlight to sell its entire stake in Punch Taverns after learning that the company was about to announce a round of equity financing. At the time of Einhorn's order, Greenlight owned 13.3% of Punch's stock.
The FSA said that Einhorn learned on June 9, 2009, from a broker working for Punch that the company was near an equity fundraising. Einhorn then instructed his hedge fund to sell its stake. Greenlight didn't manage to dump the whole of it, selling 11.7 million shares to cut its stake in Punch to 8.9%. But the sale helped Greenlight avoid £5.8 million in losses after Punch announced its fundraising on June 15.
"Einhorn is an experienced professional with a high profile in the industry," the FSA's acting head of enforcement and financial crime, Tracey McDermott, said. "We expect someone in his position to be able to identify inside information when he receives it and to act appropriately. His failure to do so is a serious breach of the expected standards of market conduct."
Einhorn said he did not believe he was violating market abuse rules, a defense the FSA accepted with the caveat that the Punch tip "was inside information and Einhorn should have appreciated this." The Greenlight chief added that he still believes he did nothing wrong and agreed to the fine "rather than continue an arduous fight."
He added that Greenlight's investors would not bear any of the fine.