FSA fines former Greenlight Capital compliance officer £130k
The FSA has fined Greenlight Capital trader and compliance officer Alexander Ten-Holter £130,000 for failing to make “reasonable” enquiries before being ordered to sell the firm’s shareholding in Punch Taverns.
The regulator has also banned Ten-Holter from performing compliance and oversight and money laundering reporting functions, after the regulator found he had not made any enquiries into whether the call had been made because of the receipt of insider information.
It has also fined Caspar Agnew, a trading desk director at JP Morgan Cazenove, £65,000 for failing to identify and act on a suspicious order from Greenlight to sell Punch shares that allowed the firm to be used to facilitate insider dealing or market abuse. The FSA says as a result of Agnew’s failings JP Morgan failed to identify the trade as suspicious and report it to the FSA.
On Wednesday, the regulator fined David Einhorn, the owner of the US hedge fund Greenlight Capital and his fund £7.2m for engaging in market abuse.
On June 9 2009, Ten-Holter received an order to sell Greenlight’s entire shareholding in Punch despite being made aware that Greenlight had spoken to Punch management minutes before its decision to sell.
The Greenlight analyst who gave the sell order told Ten-Holter that Punch management would have told them “secret bad things” had they signed a confidentiality agreement and the analyst thought that Greenlight had a potential one week window before the stock plummets. The FSA says this should have alerted Ten-Holter to the risk that Greenlight may have received inside information.
The FSA says Ten-Holter took no steps to satisfy himself that the order was not based on inside information, despite a clear indication that it was.
On June 15 2009, Punch announced a fund raising of £375m. Following the announcement, Punch’s shares fell by 29.9 per cent. Greenlight’s trading had avoided losses of approximately £5.8m for the funds under Greenlight’s management.
Agnew’s misconduct related to his dealings with Greenlight between June 9-12 2009, when he was instructed by Ten-Holter to sell 11.4m Punch shares, which constituted over 4 per cent of its issued share capital.
The FSA says Agnew failed to “act with due skill, care and diligence” and failed to alert JP Morgan Cazenove to the possibility that the trade was being conducted on the basis of inside information. Agnew thought that Greenlight was simply fortunate in its timing of its transactions.
FSA acting director of enforcement and financial crime Tracey McDermott says: “Ten-Holter’s approach to compliance oversight was wholly inadequate. Serious compliance failures of this nature can have a dramatic effect on the orderliness and integrity of the markets. Agnew was an experienced trader, so should have been suspicious of this transaction and aware of his responsibilities to report it.
“Tackling market abuse and insider dealing is not just an issue for the regulator. Compliance professionals and staff on sales and trading desks play a key role in assisting the FSA in detecting and preventing market abuse.”
A Greenlight spokesman says: “Alex is a valued member of the Greenlight team and our trader in the UK. We believe that the FSA’s action against him is unwarranted. He has our full support.”