US hedge fund and owner fined £7.2m

25 January 2012 | By Rob Langston

The City regulator handed out the fine after Einhorn and Greenlight Capital were found to have traded on inside information relating to pub chain Punch Taverns.

Einhorn was made aware of a “significant equity fundraising” by the pub chain in 2009 by a corporate broker in a phone conversation.

The FSA says this was inside information and Einhorn should have been aware. However, the hedge fund founder gave orders to dump the stock, having previously held 13.3% of the company’s issued equity, whch was later reduced to 8.89%.

The company, which raised £375m, saw its share price drop by 29.9% after the fundraising and helped it avoid £5.8m in losses.

The regulator says although the trading was not deliberate as he had not believed it was inside information, there hade been no “reasonable belief”.

Tracey McDermott, acting director of enforcement and financial crime at the FSA, says Einhorn is an “experienced professional with a high profile”.

She says: “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.

“It is highly damaging to market confidence when privileged shareholders commit market abuse, and the high penalty reflects the seriousness of his breach.”

Einhorn was fined is £3.6m and Greenlight’s fine is £3.7m, both which included a disgorgement of financial benefit.

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