Compliancex

Two days after the U.K.’s Financial Services Authority fined Greenlight Capital Inc. £7.2 million over alleged insider trading, the regulator announced additional fines against a former Greenlight compliance officer and a J.P. Morgan trading desk director, the Wall Street Journal reports.

Alexander Ten-Holter, a trader and a former compliance officer at Greenlight, was fined £130,000 for insufficient oversight involving the sale of Punch Taverns PLC shares in advance of a 2009 planned equity raising.

J.P. Morgan trading desk director Caspar Agnew was fined  £65,000 for failure to identify and take action on a suspicious order that Greenlight made to sell shares in Punch that enabled the firm to be used to facilitate market abuse or insider trading.

The original fine against Greenlight and its owner, powerful hedge-fund manager David Einhorn, was related to the sale of a stake worth 4.41% in U.K. pub operator Punch.  According to the FSA, the sale came after receiving information concerning the fundraising which occurred days afterward and made it possible for Greenlight to avoid losses of around £5.8 million.

According to the FSA, Ten-Holter failed “to question and make reasonable enquiries before selling Greenlight’s shareholding in Punch.” The FSA also said that Agnew failed to inform his bosses that the trade might be conducted using inside information, even though he knew that Punch shareholders may have been pre-marketed before the unscheduled announcement, which meant that major stockholders might have gotten insider information.

“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,” said FSA enforcer Tracey McDermott.

“Agnew was an experienced trader, so should have been suspicious of this transaction and aware of his responsibilities to report it,” McDermott added.

Greenlight and Einhorn issued a statement via email supporting Ten-Holter: “Alex is a valued member of the Greenlight team and our trader in the U.K. We believe that the FSA’s action against him is unwarranted. He has our full support.”

According to Reuters, the FSA said that Ten-Holter knew that Greenlight has been in touch with the management of Punch just a few minutes before the 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 potentially a window of a week before the stock “plummets,”" the FSA statement said.

As a result, Ten-Holter should have realized that Greenlight could be trading on inside information, the FSA added.

Andrew Osborne, a London-based corporate broker at Bank of America Corp.’s Merrill Lynch unit until last month, also faces a fine of £350,000 pounds in connection with the case, the Wall Street Journal reports.  Corporate brokers are a type of banker not found in the U.S. Their function is to be a liaison between public companies and institutional investors.

The FSA says that Osborne, who was not named in the complaint, indicated to Einhorn on a conference call that Punch was going to sell more shares, which could indicate that the stock would go down. After that call, Greenlight sold a significant number of Punch shares, and subsequently the stock did go down.

Jon Lewin is a contributing writer for CompliancEX and Wall Street Job Report.