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FSA fines ex-Merrill Lynch International director £350k

The FSA has fined a former Merrill Lynch International corporate broker £350,000 for disclosing inside information ahead of a £375m equity fundraising by Punch Taverns.

Ex managing director in corporate broking Andrew Osborne acted on behalf of Punch and approached major shareholder Greenlight Capital.

On June 9, 2009 Osborne held a conference call between Punch management and Greenlight president David Einhorn.

During the call, Osborne disclosed inside information that Punch was at an advanced stage of the process towards a significant equity fundraising, probably to be launched within a week’s time.

As an approved person Osborne had a duty not to disclose inside information and to consider the risk of market abuse. The FSA says he failed in both these duties and engaged in market abuse by improperly disclosing inside information to Greenlight.

Inside information can be provided to a third party under a process known as ’wall-crossing’.

Wall-crossing is often used to gauge interest among existing shareholders for a proposed transaction. If a third party agrees to be wall-crossed it can receive the inside information but is restricted from trading or disclosing the information. It can only trade on the company’s share once information is made public or the transaction is confirmed as not going ahead.

Greenlight refused to be wall-crossed, but the information was still disclosed during the conference call.

The regulator says while 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 June 15, 2009, Punch announced an equity fundraising of £375m and the price of its shares fell by 29.9 per cent. Greenlight’s trading ahead of the announcement avoided losses of approximately £5.8m.

FSA acting director of enforcement and financial crime Tracey McDermott says: “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.”


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  1. I hope that Greenlight have been fined at least £5.8m because they actually used the inadvertent(deliberate or otherwise) inside information?

    £350k seems a bit harsh, unless he personally (or his firm) profited?

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