High-profile hedge fund manager David Einhorn and his U.S.-based Greenlight Capital Inc. have been fined 7.2 million pounds ($11.2 million) for trading on inside information, Britain's market regulator said Wednesday.
Roughly half the penalty will have to paid by Einhorn, making it the second-largest U.K. fine imposed on an individual by the Financial Services Authority, a spokesman for the watchdog said.
In a statement the FSA said Einhorn had been tipped off that leading British pub operator Punch Taverns PLC was about to begin raising money by issuing new shares only minutes before he began dumping millions of the company's shares on June 9, 2009.
As the value of Punch shares would have fallen following the announcement of the share issue, Greenlight avoided making a substantial loss by selling them early.
The authority said that while it accepted that Einhorn did not believe he was breaking the rules, the tip-off "was inside information and Einhorn should have appreciated this." It added that the lapse was particularly egregious given Einhorn's prominence.
"Einhorn is an experienced professional with a high profile in the industry," said Tracey McDermott, the authority's acting director of enforcement and financial crime. "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 in a statement that while he believes he did nothing wrong, he and his company had decided to put the matter to rest "rather than continue an arduous fight."
He added that the fine would not be borne by Greenlight funds.
Einhorn is a charismatic figure best known outside the world of finance for his poker-playing prowess, winning a major 2006 tournament, and his unsuccessful attempt to secure minority ownership of the New York Mets.
In the industry, he built a fearsome reputation for publicly criticizing overvalued companies, including Lehman Bros., which he accused of putting the entire financial system at risk several months before the investment bank spectacularly collapsed.
His book, "Fooling Some of the People All of The Time," explores how weak regulators and compromised officials have allowed Wall Street companies to run amok.
Financial Services Authority: http://www.fsa.gov.uk/
Greenlight Capital: https://www.greenlightcapital.com/
Einhorn's book: http://foolingsomepeople.com/