UK watchdog fines ex-broker over market abuse

AP News
Posted: Feb 16, 2012 2:14 PM
UK watchdog fines ex-broker over market abuse

An ex-corporate broker with Merrill Lynch was on Thursday fined 350,000 pounds (US$552,540) for supplying inside information to a high-profile hedge fund manager.

The Financial Services Authority said Andrew Osborne, formerly a managing director in corporate broking at Merrill Lynch International _ now Bank of America Merrill Lynch International _ tipped off David Einhorn and his U.S.-based Greenlight Capital Inc. in 2009.

In a phone call, Osborne indicated leading British pub operator Punch Taverns PLC would begin raising money by issuing new shares. Within minutes, Einhorn's firm dumped millions of the company's shares.

Einhorn and Greenlight Capital Inc. were last month fined 7.2 million pounds ($11.2 million) for trading on inside information. Two traders received smaller fines for failing to question Einhorn's order to sell the shares.

Because 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 following Osborne's tip off.

"Osborne was a highly experienced broker in a position of considerable responsibility at a leading financial institution," Tracey McDermott, the regulator's acting director of enforcement and financial crime, said in a statement.

"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. By disclosing inside information, Osborne engaged in serious market abuse," she said.

Einhorn is a charismatic figure best known outside the world of finance for winning a major poker tournament in 2006, and also for his unsuccessful attempt to secure minority ownership of the New York Mets.

In issuing his fine, the authority watchdog accepted that Einhorn did not believe he was breaking rules, but said he should have recognized that the tip constituted inside information.