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Ex-Merrill Lynch director fined £350,000 for market abuse

Ex-Merrill Lynch director fined £350,000 for market abuse

The Financial Services Authority (FSA) has officially fined Andrew Osborne, former managing director in corporate broking at Merrill Lynch £350,000 for his role in the David Einhorn insider dealing case involving Punch Taverns.

The regulator said that in June 2009 during a call with Einhorn, owner of hedge fund Greenlight Capital, Osborne disclosed that Punch was at an advanced stage of the process towards a significant equity fundraising.

In January, the Financial Times reported that Obsorne, who resigned from the bank late last year, was considering whether to appeal against the fine to a tribunal.

The FSA said that as an approved person Osborne had a duty not to disclose inside information or to engage in market abuse, both of which he failed to do when he revealed information to Greenlight.

Osbourne said that he had decided not to refer the fine to the Tribunal because he wanted to 'draw a line under the long, arduous and time consuming processes.' 

He argued that the FSA's decision was not a fair one because he had not passed on inside information and that the fine was too high.

He said: 'The FSA is clear that not one single piece of information I disclosed constituted inside information.  The FSA accepts that I did nothing deliberate, dishonest or reckless and at worst this was an error of judgement.

'I believe that the level of fine is disproportionate and bears no relation to previous cases of inadvertent disclosure and is even higher than many cases of deliberate disclosure.'

On 9 June 2009, Einhorn sold 11,656,000 Punch shares within four days, reducing its holding in Punch from 13.3% to 8.89% of Punch’s issued equity.

Punch announced a fundraising of £375 million on 15 June 2009.

Following the announcement the price of Punch shares fell by 29.9%. Greenlight’s trading had thereby avoided losses of approximately £5.8 million for the funds under Greenlight’s management.

Greenlight and Einhorn were fined £7.2 million.

The FSA said that despite this being a serious case of market abuse, the improper disclosure was not deliberate and in passing the information Obsorne did not intend or expect Greenlight to sell its Punch shares.

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