Einhorn, Greenlight fined for UK market abuse

Wed Jan 25, 2012 6:51pm EST
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By Tommy Wilkes and Katya Wachtel

LONDON/NEW YORK (Reuters) - David Einhorn's reputation as one of the hedge fund industry's most respected investors took a bit of a hit on Wednesday when Britain's financial regulator imposed a 7.2 million pounds ($11 million) fine on him and his Greenlight Capital fund for alleged trading abuses.

Britain's Financial Services Authority (FSA) said it fined Einhorn 3.64 million pounds ($5.67 million) and Greenlight Capital 3.65 million pounds for using inside information he obtained from a broker before selling shares in a UK public company in 2009.

The regulator said Einhorn had learned from a telephone conversation with the broker that British pub company Punch Taverns was on the verge of a significant equity fundraising, prompting Einhorn to sell down his holdings before an expected fall in the shares.

This decision allowed Einhorn to avoid losses of around 5.8 million pounds, the FSA said.

On Wednesday, Einhorn told investors that he did not believe he or the firm had any inside information when it traded the stock. He said the chief executive of Punch Taverns had reiterated to him during that conference call that no formal decision to issue equity had been made at the time their conversation took place.

"It was unambiguous," Einhorn told Greenlight investors during a conference call. "Nothing had been decided. Nothing was imminent. I was told no decision had been made and Punch was simply exploring strategic alternatives" to raise funds.

The FSA said Einhorn's decision to sell stock in the wake of the call allowed Greenlight to avoid losses of around $9 million (5.8 million pounds).

"The FSA accepted that Einhorn's trading was not deliberate because he did not believe that it was inside information. However, this was not a reasonable belief," the regulator said.   Continued...