Elliott Management Corp. was accused Friday by French regulators of misleading the market about its investment strategy in 2015 regarding a trucking company that XPO Logistics Inc. was planning to acquire. The hedge fund risks a €20 million ($22 million) fine.
At the heart of the case are regulatory declarations Elliott made as it was building a derivatives position in the transport company, Norbert Dentressangle. French investigators say Elliott’s filings said it had acquired contracts for difference when it had actually bought equity swaps. The latter derivative might have hinted Elliott was planning to acquire a stake to prevent a squeeze out, an AMF official said.
Elliott — which subsequently acquired about 9% of Norbert Dentressangle shares — was also accused of failing to flag sufficiently quickly its intention not to tender into XPO’s 2015 offer. The allegations were detailed Friday at a hearing of the enforcement committee of France’s Autorite des Marches Financiers.
Audrey Micouleau, the AMF official who spoke on behalf of investigators, said Elliott obstructed the case. She recommended a €15 million fine for Elliott Advisors U.K. Ltd. and an additional penalty of €5 million for Elliott Capital Advisors.
Anne Le Lorier, another AMF official who played the role of a devil’s advocate in the case, disagreed with investigators on certain points, in particular concerning the impact of the CFD declarations. “There’s no evidence showing the market was misled,” Ms. Le Lorier said.
It’s the second time billionaire Paul Singer’s Elliott has faced accusations at the AMF. The hedge fund was fined €16 million by the markets regulator in 2014 for using non-public information in the 2010 purchase of shares of a toll road company in France.
The AMF’s enforcement committee assesses market abuse cases ranging from insider trading to publishing misleading information. It has the power to issue civil fines and bans and typically issues decisions several weeks after the hearings.
Jean-Pierre Martel, a lawyer for Elliott, wondered why there was so much “hostility” toward the hedge fund. Mr. Martel said that Elliott made nearly 40 declarations and clearly wasn’t covertly building its stake in Norbert Dentressangle. The regulator was improperly differentiating two similar financial instruments, he said.
“No differentiation is made in the market between CFDs and equity swaps,” he said. “It’s like a car and an automobile.”
Mr. Martel denied any obstruction. “How can one speak of obstruction when someone has scrupulously responded to all questions asked and provide all documents required without any exception?” the lawyer said.
He said that to squeeze out investors — which would require having at least 95% of shares — XPO needed to offer the right price.“There was no extortion, as XPO alleges,” Mr. Martel said. XPO and Elliott reached a settlement in November on the sale of the hedge fund’s stake.