Greenlight Capital and its chairman, David Einhorn, were fined £7.2 million ($11.2 million) by the U.K.’s Financial Services Authority for trading on inside information in the sale of Punch Taverns in 2009.
Mr. Einhorn was told of Punch Taverns’ plan to sell equity by a broker representing the company, the FSA said in an e-mailed statement. He then sold more than 11 million Punch Tavern shares over the following four days, avoiding losses of about £5.8 million for the fund, the regulator said.
Greenlight said the market abuse was “inadvertent,” and the regulator agreed it wasn’t deliberate or reckless. The fine won’t come out of Greenlight funds, the hedge fund firm said in a statement.
“We believe that this action is unjust and inconsistent with the law and with prior FSA enforcement,” Mr. Einhorn said in the Greenlight statement. “However, rather than continue an arduous fight, we have decided to put this matter behind us.”
The $7.8 billion Greenlight Capital fund returned 2.9% last year and has produced annualized returned of 20% since the fund started in May 1996, according to a letter sent to investors.
Mr. Einhorn heard in a June 2009 telephone conference call that Punch Taverns was about to sell additional equity, the FSA said. Mr. Einhorn gave instructions to Greenlight to sell Punch shares “a matter of minutes” after the call ended, according to the regulator. The hedge fund reduced its holdings in Punch shares from 13.3% of its outstanding shares to 8.9% over the next four days.
An outside spokeswoman for Punch declined to comment on the FSA fine and refused to provide her name citing company policy.