Broker fined £350,000 for disclosing inside information

By Bridging Loan Directory -

 

The Financial Services Authority (FSA) has fined Andrew Osborne, former Managing Director in Corporate Broking at Merrill Lynch International (now Bank of America Merrill Lynch International) £350,000, for engaging in market abuse by improperly disclosing inside information ahead of a significant equity fundraising by Punch Taverns Plc (Punch) in June 2009.

Osborne acted on behalf of Punch and approached Greenlight Capital Inc (Greenlight), a major shareholder at the time. Greenlight refused to be wall-crossed1 yet on 9 June 2009, Osborne proceeded with a conference call between Punch management and David Einhorn, President of Greenlight.

During the call, Osborne disclosed inside information that Punch was at an advanced stage of the process towards a significant equity fundraising, probably within the timescale of a week. As an approved person with considerable experience, 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. While the FSA accepted Osborne’s actions were not deliberate, this was a serious case of market abuse which undermined the integrity of the market and damaged market confidence.

Shortly after the call, Osborne was aware that Greenlight was selling Punch shares.  He failed to raise concerns with senior management, legal or compliance personnel or take any steps to address the risk of market abuse.  On 15 June 2009, Punch announced an equity fundraising of £375 million and the price of its shares fell by 29.9%. Greenlight’s trading ahead of the announcement avoided losses of approximately £5.8 million.

Tracey McDermott, acting director of enforcement and financial crime, said:

“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.

“By disclosing inside information, Osborne engaged in serious market abuse. His actions undermined the orderliness and integrity of the market and the high penalty reflects the seriousness of his breach. There should be no doubt about the FSA’s commitment to take tough action where approved persons fail in their responsibilities.”