Broker Fined In Greenlight Insider-Trading Case

Feb 16 2012 | 11:51am ET

British regulators have fined the former Bank of America Merrill Lynch broker who spilled a juicy corporate secret to Greenlight Capital's David Einhorn.

Andrew Osborne was ordered by the Financial Services Authority to pay £350,000 (US$550,000) for giving Einhorn advanced word of an equity sale by Punch Taverns, just one day after the hedge fund manager had declined to talk about Punch with Osborne on a confidential basis.

According to the FSA, Osborne told Einhorn about the fundraising on June 9, 2009, leading the hedge fund manager to sell a chunk of Greenlight's 13.3% stake in Punch. The sale helped Greenlight avoid £5.8 million in losses after Punch announced the stock sale.

Einhorn was ordered to pay £7.2 million in restitution and fines last month. A former compliance officer at the firm and a JPMorgan Cazenove trading desk director were also fined.

"Osborne engaged in serious market abuse," FSA acting head of financial crime Tracey McDermott said. "He was trusted as the gatekeeper of inside information and should have been extremely cautious in proceeding with the call with Greenlight."

Like Einhorn, Osborne insists that he did nothing intentionally wrong and that the fine was not "a fair outcome."

"None of the many advisers of others involved in this transaction believed that any inside information had been passed by me at the time or raised any issues regarding the sale of shares by Greenlight," he said. "The FSA accepts that I did nothing deliberate, dishonest or reckless and at worst this was an error of judgment."


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