Yet another domino has fallen in the insider trading case involving U.S. hedge fund manager David Einhorn, as the UK Financial Services Authority has fined a former broker at Merrill Lynch £350,000 (C$547,000) for disclosing inside information.
The FSA Thursday fined Andrew Osborne, former managing director in corporate broking at Merrill Lynch International, for engaging in market abuse by improperly disclosing inside information ahead of a significant equity fundraising by Punch Taverns plc in June 2009.
The FSA has already fined Einhorn and his firm Greenlight Capital Inc. £7.2 million for trading on that information; and it has also sanctioned a trader and compliance officer involved for failing to prevent the improper trading.
The regulator says that in a conference call between Punch management and Einhorn, Osborne, who was acting on behalf of Punch, disclosed inside information that Punch was at an advanced stage of the process towards a significant equity fundraising. The hedge fund firm then traded on that information.
The FSA says Osborne was fully aware of his duties not to disclose inside information and to consider the risk of market abuse. “He failed in both these duties and engaged in market abuse by improperly disclosing inside information to Greenlight,” the FSA says, adding that while it accepted that his actions were not deliberate, “this was a serious case of market abuse which undermined the integrity of the market and damaged market confidence.”
“Osborne was a highly experienced broker in a position of considerable responsibility at a leading financial institution. He was trusted as the gatekeeper of inside information and should have been extremely cautious in proceeding with the call with Greenlight in light of the clear legal and regulatory risks involved,” said Tracey McDermott, acting director of enforcement and financial crime.