The Financial Services Authority (FSA) has fined a former managing director at Merrill Lynch International for disclosing inside information about Punch Taverns prior to its 2009 rights issue.
In a statement the FSA said it had fined Andrew Osborne, former managing director in Corporate Broking at Merrill Lynch International (now Bank of America Merrill Lynch International), £350,000 for engaging in market abuse.
The FSA said Osborne had improperly disclosed inside information ahead of a Punch Taverns fundraising in June 2009.
The FSA said Osborne acted on behalf of Punch and approached Greenlight Capital Inc (Greenlight), a major shareholder at the time.
During a phone call, Osborne disclosed inside information that Punch was at an advanced stage of the process towards a significant equity fundraising.
The FSA said given Osborne's status as an approved person with considerable experience, he was fully aware of his duties not to disclose inside information and to consider the risk of market abuse.
The regulator said he failed in his duties and engaged in market abuse by improperly disclosing inside information to Greenlight.
The FSA accepted Osborne's actions were not deliberate, but said this was a serious case of market abuse which undermined the integrity of the market and damaged market confidence.
Punch subsequently announced an equity fundraising of £375 million, with shares falling 29.9% in value. However, having already traded the shares, Greenlight avoided losses of approximately £5.8 million.
Tracey McDermott, acting director of enforcement and financial crime, said:
"Osborne was a highly experienced broker in a position of considerable responsibility at a leading financial institution. He was trusted as the gatekeeper of inside information and should have been extremely cautious in proceeding with the call with Greenlight in light of the clear legal and regulatory risks involved.
"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."
The latest fine linked to Punch comes after the FSA punished a former compliance officer at Greenlight Capital, Alexander Ten-Holter, and a trader at JP Morgan Cazenove, Caspar Agnew, for offences related to the market abuse case.
Ten-Holter was fined £130,000 for failing to question and make reasonable enquiries before selling Greenlight's shareholding in Punch Taverns before a significant equity fundraising by Punch in June 2009. The FSA said this meant Ten-Holter was unable to perform compliance oversight and money laundering reporting functions.
Agnew was fined £65,000 for failing to identify and act on a suspicious order from Greenlight to sell Punch shares. This led to the firm being used to facilitate insider dealing or market abuse, the FSA said.
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