DECISION NOTICE

To:
Greenlight Capital Inc.

New York

TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London E14 5HS (“the FSA”) has decided to take the following action:

1.
ACTION

1.1. For the reasons set out below, the FSA has decided to impose on Greenlight Capital Inc
(“Greenlight”) a financial penalty, pursuant to section 123(1) of the Act, of £3,650,795
for engaging in market abuse in breach of section 118(2) of the Act.

1.2. The financial penalty to be imposed on Greenlight consists of the following elements:

i.
A disgorgement of financial benefit arising from the market abuse of £650,795
representing the losses Greenlight avoided by way of reduced performance and
management fees through the sale of Punch Taverns Plc (“Punch”) shares

ii.
An additional penalty element of £3 million.

2.
REASONS FOR THE ACTION


2.1. This notice is issued to Greenlight as a result of the behaviour of David Einhorn (“Mr
Einhorn”) between 9 and 12 June 2009. Greenlight is wholly owned by Mr Einhorn
and he is the President and sole portfolio manager of Greenlight and is responsible for
all investment decisions on behalf of Greenlight. Mr Einhorn’s behaviour is attributable
to Greenlight and Greenlight has therefore engaged in market abuse, for the reasons set
out below.


2.2. Greenlight is an investment management firm based in the United States. Greenlight
manages investments held by various entities (“the Greenlight Funds”). Several of the
Greenlight Funds had shareholdings in Punch. (The Greenlight Funds held a
combination of Punch shares and contracts for difference referenced to Punch shares.
There is no material difference between shares and contracts for difference for the
purpose of this Notice and, for convenience, this Notice therefore refers to the
Greenlight Funds holding ‘shares’ in Punch and being ‘shareholders’ in Punch even
though part of the investment was through contracts for difference.) The Greenlight
Funds first acquired shares in Punch on 16 June 2008 and, by June 2009, the Funds
owned 13.3% of Punch’s issued share capital.

2.3. On Monday 15 June 2009, Punch announced a transaction to issue new equity in order
to
raise
approximately
£375
million
of
capital
(“the
Transaction”).
[REDACTED] Prior to the announcement of the Transaction, various shareholders and
potential investors had been wall crossed by Firm X. Specific wall crossing procedures
were in place for Punch’s existing large US-based shareholders whereby they would be
asked to agree the terms of a non disclosure agreement (“NDA”). (The terms “wall
crossing” and “non-disclosure agreement” or “NDA” are explained further at
paragraphs 3.8-3.12 below.)

2.4. On Monday 8 June 2009 (7 days before the announcement of the Transaction), Firm X
raised with Greenlight the subject of a possible equity issuance by Punch, and invited
Greenlight to be wall crossed in relation to Punch. Mr Einhorn refused this request, but
a call was arranged for the following day between Punch’s management and Mr
Einhorn on a non-wall crossed basis.

2.5. On Tuesday 9 June 2009, a corporate broker from Firm X (“the Broker”) and Punch
management proceeded to have a telephone conference call with Mr Einhorn (“the
Punch Call”).

2.6. Even though the Punch Call was expressly set up on a ‘non-wall crossed’ basis, inside
information was disclosed to Mr Einhorn during the call. The inside information
disclosed to Mr Einhorn was that Punch was at an advanced stage of the process
towards the issuance of a significant amount of new equity, probably within a timescale
of around a week, with the principal purpose of repaying Punch’s convertible bond and
creating headroom with respect to certain covenants in Punch’s securitisation vehicles.

2.7. Immediately following the Punch Call, Mr Einhorn directed that Greenlight traders sell
the Greenlight Funds’ entire shareholding in Punch. The decision to sell was solely Mr
Einhorn’s. Mr Einhorn decided to sell on the basis of the inside information he
received on the Punch Call (albeit not solely on this basis). Between 9 June and 12

2

June 2009, Greenlight sold 11.65 million shares in Punch and thereby reduced the
Greenlight Funds’ stake from 13.3% to 8.98%.

2.8. The Transaction was announced to the market on 15 June 2009. Following the
announcement of the Transaction, the price of Punch’s shares fell by 29.9%.
Greenlight’s sale of Punch shares prior to the announcement of the Transaction had
resulted in loss avoidance of approximately £5.8 million for the Greenlight Funds.

2.9. The FSA considers this to be a serious case of market abuse by Greenlight arising from
the behaviour of Mr Einhorn, in particular for the following reasons:

(i)
Greenlight’s trading took place over a period of four days and represented a
large part of the daily volume traded in Punch shares over that period. Such
significant trading in a stock on the basis of inside information severely
undermines confidence in the market. The trading was highly visible to
market participants.

(ii)
The trading resulted in loss avoidance for the Greenlight Funds of £5.8
million.

(iii)
Greenlight is a high profile hedge fund, at which Mr Einhorn occupies a
prominent position as President.

(iv)
Mr Einhorn is an experienced trader and portfolio manager. He has had over
15 years of experience running an investment management firm and should
therefore be held to the highest standards of conduct and the highest levels of
accountability.

(v)
Given Mr Einhorn’s position and experience, it should have been apparent to
him that the information he received on the Punch Call was confidential and
price sensitive information that gave rise to legal and regulatory risk. The
Punch Call was unusual in that it was a discussion with management following
a refusal to be wall crossed. In the circumstances Mr Einhorn should have
been especially vigilant in assessing the information he received. It was a
serious error of judgement on Mr Einhorn’s part to make the decision after the
Punch Call to sell Greenlight’s shares in Punch without first seeking any
compliance or legal advice despite the ready availability of such resources
within Greenlight.

2.10. Despite being a serious case of market abuse which merits the imposition of a
substantial financial penalty, the market abuse was not deliberate or reckless. Mr
Einhorn did not believe that the information that he had received was inside
information, and he did not intend to commit market abuse. Nevertheless, the FSA
considers Mr Einhorn’s error of judgement to be a serious failure to act in accordance
with the standards reasonably expected of market participants. The FSA considers that
Mr Einhorn’s behaviour can be attributed to Greenlight.

3.
FACTS AND MATTERS

3

Mr Einhorn and Greenlight

3.1. Greenlight is a private investment management firm, wholly owned by Mr Einhorn and
based in the United States. In 2009, Greenlight had approximately US$5 billion of
assets under management and 31 employees, mainly based in the US with a small
number in the UK.

3.2. Greenlight follows a value-oriented investment philosophy and generally invests in
shares and other investments that it considers to be mispriced. It mainly invests in
stocks trading on the US markets, and those in Europe, including the UK.

3.3. Mr Einhorn was one of the two founding members of Greenlight in 1996 and is the
President and sole portfolio manager of Greenlight. He has responsibility for all of
Greenlight’s investment decisions.

3.4. Mr Einhorn has significant experience as a trader and a portfolio manager. His
experience includes dealings in stocks admitted to trading on EU regulated markets,
including the UK markets.

The Greenlight Funds’ investment in Punch

3.5. Greenlight first acquired shares in Punch on 16 June 2008 for the Greenlight Funds.
Greenlight bought shares in June and July 2008 (approximately 26.6 million shares) and
then bought again in December 2008 and January 2009 (approximately a further 9
million shares). The price of Punch shares as against the Greenlight Funds’ position in
Punch is shown on the graph below:

Closing Prices and GL Positions in PUB - June 08 to November 09

Position at Close on 12/06/09 =
23,892,813 shares: having sold
11,656,000 since close on
08/06/09

Closing Price on
15/06/09 =104p having fallen
29.9%

0

5,000,000

30,000,000

35,000,000

02/06/2008
11/06/2008
20/06/2008
01/07/2008
10/07/2008
21/07/2008
30/07/2008
08/08/2008
19/08/2008
29/08/2008
09/09/2008
18/09/2008
29/09/2008
08/10/2008
17/10/2008
28/10/2008
06/11/2008
17/11/2008
26/11/2008
05/12/2008
16/12/2008
29/12/2008
08/01/2009
19/01/2009
28/01/2009
06/02/2009
17/02/2009
26/02/2009
09/03/2009
18/03/2009
27/03/2009
07/04/2009
20/04/2009
29/04/2009
11/05/2009
20/05/2009
01/06/2009
10/06/2009
19/06/2009
30/06/2009
09/07/2009
20/07/2009
29/07/2009
07/08/2009
18/08/2009
27/08/2009
08/09/2009
17/09/2009
28/09/2009
07/10/2009
16/10/2009
27/10/2009
05/11/2009
16/11/2009
25/11/2009

300.00

500.00

Price (p)

3.6. Greenlight was therefore a buyer of Punch shares between June 2008 and January 2009
and the position was held until June 2009. At no time prior to the Punch Call on 9 June
2009 had Greenlight sold or attempted to sell any Punch shares.

3.7. Mr Einhorn’s initial decision to invest in Punch shares was made on the basis that
Punch stock was mispriced by the market and that the chances of an equity issuance
were not high. In Greenlight’s letter to investors dated 1 October 2008, reasons for
investing in Punch were explained:

During the quarter, the market began pricing in a high risk of default or cash
trapping within the securitisations. In addition, PUB [PUB is the Bloomberg
ticker for Punch] announced its intention not to pay a final dividend for fiscal
year 2008 to conserve cash at the parent company. The market took PUB’s
conservatism as a sign of potential cash flow problems regarding the debt and
began pricing in an equity issuance to pay down the convertibles. Based on
conversations with the company and analysis of the debt documents,
Greenlight believes PUB has the flexibility to manage its securitisations
without a liquidity crunch, even in difficult periods for pubs. PUB is likely to
use the cash savings from the cancelled dividend to pay down some of its debt
early. We do not think the chances of an equity issuance are high. Greenlight
initiated the position at £2.83, or less than 4x estimated 2008 profits. PUB
shares ended the quarter at £1.32 (you do the multiple).

Wall crossing

3.8. Wall crossing is a process whereby a company can legitimately provide inside
information to a third party. A company may wall cross a variety of third parties
ranging from large institutional shareholders to small shareholders or completely
unrelated parties.

3.9. There are a number of reasons for wall crossing third parties. A common reason is to
give the third party inside information about a proposed transaction by a company that
is publicly listed (for example, a merger or acquisition, or fundraising transactions,
including equity issuances).

3.10. In the context of a proposed transaction, the purpose of the wall crossing is to share
inside information with the third party in order to be able to discuss the third party’s
views on the transaction. These views would usually include an indication of the third
party’s interest in and/or support for the transaction.

3.11. Once a third party agrees to be wall crossed, it can be provided with inside information
and it is then restricted from trading. The party is only able to trade in the company’s
shares again once the information it has been given is made public. In the context of a
transaction, the information will be made public either when the transaction is
announced to the market, or in cases where a transaction does not proceed, when an
announcement is made to the market stating that a transaction was contemplated, but
did not proceed. This announcement may be referred to as a cleansing statement.

3.12. Wall crossing is a well-established practice in large public companies and investment
banks. It may be carried out verbally or recorded in writing. An example of a verbal
process of wall crossing would be where the third party is contacted by telephone. The
third party is asked if they are prepared to be wall crossed, usually for a specified
period of time. If they agree, they are then told the relevant information. An example
of a wall crossing procedure recorded in writing is where written terms are agreed.
These terms set out the basis on which the third party agrees to receive the inside

5

information. Such agreements may be referred to as non-disclosure agreements or
NDAs.

6

Events leading up to the Punch Call on 9 June 2009


3.13. Punch had considered issuing equity in late 2008, but had been advised that an equity
issuance would not be possible due to poor market conditions. In early 2009, market
conditions improved such that equity transactions once more became a realistic
possibility.

3.14. Punch issued interim results for the first quarter of 2009 on 29 April 2009. It then
conducted a post results road show at the beginning of May. During the road show,
several shareholders and potential investors pro-actively suggested to Punch that it
should consider an equity issuance.

3.15. Following the road show, on 6 May 2009, the Board of Punch gave approval for
management to consider an equity issuance. The principal purpose of the proposed
issuance was to repay a convertible bond in the sum of approximately £220 million, and
also to create headroom with respect to certain covenants in Punch’s securitisation
vehicles. (Punch had three wholly owned securitisations vehicles. Punch’s assets (i.e.,
the pubs) were owned by these securitisation vehicles. Income from the securitisations
(i.e., profits made by the pubs) would flow to Punch. Certain ‘tests’ or ‘covenants’
governed the flow of money from the securitisations to Punch. If the appropriate ratio
was not maintained in respect of each test, there would be restrictions on the money
that could flow to Punch. Cash raised through an equity issuance could therefore be
used to ensure the relevant ratios were maintained and that there was no default such as
to restrict money flowing from the securitisations to Punch.)

3.16. [REDACTED]


3.17. Preparations for the Transaction were progressed in May. In early June, the Board
approved certain documentation required for the Transaction and agreed that Punch
management could speak to third parties about the proposed Transaction on a wall
crossed basis. It was decided that it would be desirable to wall cross Punch
shareholders and potential investors in the new equity prior to the Transaction being
announced to the public for the purpose of gauging support for the Transaction and
understanding the level of interest in purchasing new equity in Punch.

3.18. A significant stake in Punch was held at this time by shareholders based in America
(“the US Shareholders”), one of which was Greenlight. It was decided that the US
Shareholders would be wall crossed first. This was because it was considered desirable
to understand their response to the proposed equity issuance before wall crossing
others. The wall crossing procedure for the US Shareholders was that they would be
invited to be wall crossed and to agree to the terms of a written NDA. Only once the
terms of the NDA were agreed could details of the Transaction be provided to the US
Shareholders.

3.19. The Broker was tasked with making the initial approach to wall cross the US
Shareholders [REDACTED].

7

3.20. By the time that the Broker started to make calls to ask the US Shareholders if they
would agree to be wall crossed (on 8 June), the anticipated launch date for the
Transaction was set for Friday 12 June (although in the event this was delayed by one
trading day to Monday 15 June).

3.21. On Monday 8 June 2009, the Broker had a telephone conversation with an analyst at
Greenlight. He said that the call was a post-road show follow up call and he raised the
subject of a possible equity issuance by Punch and asked the analyst if Greenlight
would agree to be wall crossed. The wall crossing request was referred to Mr Einhorn.
Mr Einhorn would not agree to Greenlight being wall crossed and this decision was
relayed back to the Broker via the analyst. The broker attempted to persuade
Greenlight to be wall crossed, but this was not agreed and instead a call was set up for
the following day between Greenlight and Punch management on an ‘open’ basis.

Information disclosed during the Punch Call

3.22. On Tuesday 9 June, the Broker and Punch management participated in the Punch Call
with Mr Einhorn and the Greenlight analyst. The Punch Call lasted for approximately
45 minutes and involved a considerable amount of discussion between Punch
management and Greenlight.

3.23. The inside information received by Mr Einhorn on the Punch Call was that Punch was
at an advanced stage of the process towards the issuance of a significant amount of new
equity, probably within a timescale of around a week, with the principal purpose of
repaying Punch’s convertible bond and creating headroom with respect to certain
covenants in Punch’s securitisation vehicles. The Punch Call has been considered in
the context in which it took place and in its entirety:

(i)
with regard to context, Mr Einhorn knew in advance of the Punch Call that
Firm X wanted to wall cross Greenlight in relation to Punch. When the
Broker spoke to the Greenlight analyst and asked Greenlight to agree to be
wall crossed he had said that the wall crossing related to Punch. The broker
and the Greenlight analyst had also discussed Punch issuing equity on the
same telephone call; and

(ii)
the Punch Call has been considered as a whole. The particular pieces of
information that are said to amount to inside information must be read as part
of the entire conversation. The merits of Punch issuing equity form the
subject matter of the majority of the call. Punch management and the Broker
attempted to persuade Mr Einhorn of the merits of an equity issuance and
discussed the risks to the company of not issuing equity. There was no
discussion of any other possible new approach to address risks that Punch may
take.

3.24. A number of particular points of information that were disclosed to Mr Einhorn during
the Punch Call are detailed below.

3.25. First: Mr Einhorn was told that the amount of any possible equity issuance would need
to be about £350 million in order to repay the convertible and create 10% headroom in
the securitisations. This information was offered by the Broker:

Einhorn:
So, would you – as you pencil that out, what do those amounts
turn out to be?

The Broker:
Something like 350 sterling.


Einhorn:
350 million sterling?

The Broker:
If you were – if you were roughly to sort of work on the basis
that you kinda took out the – the converts and that’s something
that gives you, say, 10 percent headroom in within both of the
covenants, filed covenants.

3.26. This disclosed that the principal purpose of the issuance would be to repay the
convertible bond and create headroom in the securitisations, and that the sum of the
issuance under consideration was of a very significant size; Punch was not considering
a small equity issuance in the sum of, for instance, around £50 million. Whilst the
Broker did not give the sum of £350 million as a definitive figure, what he said to Mr
Einhorn made it clear that the transaction was to raise a sum of equity that would be of
considerable size relative to Punch’s market capitalisation (Punch’s market
capitalisation at the time of the Punch Call was approximately £400 million).

3.27. Second: Mr Einhorn was told that an NDA would last for less than a week. The
Broker offered to give Mr Einhorn a “timeframe” in respect of an NDA and when
questioned by Mr Einhorn on what that would be, the Broker stated “Well, within less
than a, kind of, week.”

3.28. Whilst an NDA does not confirm that a transaction is definitely going to take place
within a certain time scale, it does disclose anticipated timing and, in these
circumstances, it informed Mr Einhorn that the issuance was at an advanced stage.

3.29. Third: Mr Einhorn was told that Punch was consulting with all of its major
shareholders, and that there was broad support for an equity issuance, thus also
indicating that the issuance was at an advanced stage and likely to proceed. The Broker
said:

Really it’s fair to say like, consulting with all of the – the major shareholders in
terms of taking, you know, taking into account their views…

… a number of people have sort of signed NDAs because we had a bit more open
conv – conversations…


…I think it’s fair to say that, you know, broadly, mostly all the shareholders are
supportive.

3.30. The reference to other NDAs further indicated that the issuance was likely to take place
within a short period of time.

3.31. In isolation, none of the above points would (in the context of the Punch Call) amount
to inside information. However, taken together these points did constitute inside
information particularly because they disclosed to Mr Einhorn the purpose and
anticipated size and timing of the issuance.

3.32. Despite assertions made during the call by Punch management that they were
considering their options and that no formal decisions had been made, this did not
detract from the essential information disclosed during the call, namely that they were
at an advanced stage of the process towards the issuance of a significant amount of new
equity, probably within the timescale of around a week, with the principal purpose of
repaying Punch’s convertible bond and creating headroom with respect to certain
covenants in Punch’s securitisation vehicles.

Events following the Punch Call

3.33. Having decided that Greenlight should sell the entire shareholding in Punch,
immediately after the Punch Call ended Mr Einhorn gave the Greenlight analyst
instructions to that effect. He did not take the opportunity to consult with Greenlight’s
internal compliance or legal advisers. This was despite the unusual circumstances of the
call following his refusal to be wall crossed, and despite Greenlight’s own policy
regarding insider dealing which stated:

In practical terms, information you obtain that makes you want to trade, or affects
your investment decision making may well be material.

3.34. Within about two minutes of the conclusion of the Punch Call, the analyst had passed
on Mr Einhorn’s sell order to Greenlight traders.

3.35. Trades effecting the sale of Punch shares commenced through an external UK broker
less than 30 minutes after the Punch Call ended. On 9 June, Greenlight sold 3,456,000
shares of Punch which accounted for approximately 63% of the day’s volume.
Greenlight continued to sell Punch shares between 10 - 12 June and dominated trading
in Punch shares on the London Stock Exchange on these days:

•
10 June – Punch’s stock closed at 154.75p. Greenlight traded 2,000,000 shares,
62.28% of the daily volume;

•
11 June – Punch’s stock closed at 154p. Greenlight traded 6,100,000 shares,
85.52% of the daily volume;

•
12 June – Punch’s stock closed at 148.5p. Greenlight traded 100,000 shares,
6.15% of the daily volume.

3.36. On Friday 12 June at 08:31, a Regulatory News Story (“RNS”) was released by
Greenlight stating:

Greenlight reduced their investment in Punch Taverns to 12.02% on 9 June,
11.27% on 10 June, and 9% on 11 June.

3.37. On Monday 15 June an RNS was released by Punch announcing the Transaction.
Punch informed the market of its intention to raise approximately £375 million by
means of a firm placing and open offer of new ordinary shares. It also announced its
intention to make a tender offer to holders of the convertible bond to purchase any or all
of the bonds at a purchase price of not less than 95% (as a percentage of nominal
principal amount outstanding).

3.38. Following the announcement of the Transaction, the price of Punch’s shares fell by
29.9%. Greenlight’s trading had avoided losses of approximately £5.8 million.

4.
FAILINGS

4.1. Relevant statutory provisions and regulatory guidance are set out in Annex 1.

4.2. As stated above, the market abuse by Greenlight arises by the attribution of Mr
Einhorn’s behaviour to Greenlight. The analysis of the breach set out below is therefore
based on Mr Einhorn’s behaviour.

4.3. Mr Einhorn’s behaviour fell within section 118(1)(a) of the Act, in that it occurred in
relation to Punch shares:

(i)
shares in Punch are qualifying investments and contracts for difference
referenced to Punch shares are related investments under section 130A(3) of the
Act for the purpose of section 118(2) of the Act; and

(ii)
shares in Punch are traded on a prescribed market, the London Stock Exchange.

4.4. Mr Einhorn’s behaviour amounted to market abuse by way of insider dealing in breach
of section 118(2) of the Act for the following reasons (as detailed further below):

(i)
Mr Einhorn was an insider;

(ii)
Mr Einhorn dealt in the investment;

(iii)
Mr Einhorn had inside information; and

(iv)
Mr Einhorn dealt on the basis of that inside information.

4.5. Mr Einhorn was an insider because he had inside information as a result of having
access to information through the exercise of his employment at Greenlight and his
duties as President and portfolio manager of Greenlight.

4.6. Mr Einhorn dealt in the investment by directing Greenlight traders to sell Greenlight’s
Punch shares.

4.7. The information received by Mr Einhorn met the statutory requirements of inside
information, namely:

(i)
the information related to Punch and to Punch shares;

(ii)
the information was precise because:

(a)
it indicated an event (i.e., the issue of new shares) that may reasonably
have been expected to occur (see paragraphs 4.9–4.12 below); and

(b)
it was specific enough to enable a conclusion to be drawn as to the
possible effect of the share issuance on the price of Punch shares (see
paragraphs 4.13–4.16 below);

(iii)
the information was not generally available (see paragraphs 4.17–4.18 below);
and

(iv)
the information was likely to have a significant effect on the price of Punch
shares as it was information which a reasonable investor would be likely to use
as part of the basis of his investment decisions (see paragraph 4.19 below).

4.8. Mr Einhorn dealt on the basis of the inside information (see paragraph 4.20 below).


The information indicated an event may reasonably have been expected to occur

4.9. The information disclosed to Mr Einhorn was sufficiently precise to indicate that a
share issuance may reasonably be expected to occur. It was not necessary for Mr
Einhorn to be told that the issuance was definitely going to proceed and, indeed, the
Transaction was not a certainty at the time of the disclosures.

4.10. From what he was told, Mr Einhorn understood the likely amount of the issuance and
the purpose of the issuance, that an NDA would last for less than a week, that Punch
was consulting with all of the major shareholders and that other shareholders had
signed an NDA and shareholders were broadly supportive of Punch issuing equity.
These points together indicated that an equity issuance may reasonably be expected to
occur.

4.11. The information provided, that an NDA would last less than a week, is particularly
relevant in that it gave a clear indication as to the expected timing of the issuance.
When a firm wall crosses investors, a transaction is usually close to launch. Firms do
not usually wall cross investors for more than a short period of time prior to the
intended launch date of a transaction and it is usually one of the latter stages in the
transaction process. Thus, at the time of wall crossing third parties, there is no absolute
certainty that a transaction will go ahead, however, it is the case that a transaction is
likely to be at an advanced stage of preparation. The Broker’s disclosure that the NDA
would last for less than a week, together with the other pieces of information disclosed
to Mr Einhorn, provided a clear indication that the issuance was at an advanced stage,
probably with a timescale of around a week.

4.12. The information disclosed to Mr Einhorn was sufficient to indicate that an equity
issuance might reasonably be expected to occur, especially when viewed in the context
of the Punch Call generally.

The information was specific enough to enable a conclusion to be drawn as to the
possible effect of the issuance on the price of Punch shares

4.13. With regard to the price sensitivity of the information, the information given to Mr
Einhorn about the size and purpose of the issuance was sufficient to allow a conclusion
to be drawn as to its possible effect on the price of Punch shares.

4.14. The conclusion could be drawn that when the issuance was announced it would have an
effect on the price, and that if there were such an effect it would be to reduce the price.

4.15. Whilst in some situations equity issuances may cause the share price to go up, the most
likely effect of this size of equity issuance by Punch, at this time and for the given
reasons was to cause the share price to fall. The particular factors to note are:

(i)
the market was not expecting the issuance so it was not factored into the
share price; in particular, the interim results released by Punch 6 weeks
previously had indicated that Punch was financially on track and that it was
focussing on a strategy of “self help”;

(ii)
the anticipated size of the issuance was a large amount of equity in relation to
Punch’s market capitalisation;

(iii)
the money was to be used to pay off debt and create headroom in relation to
the securitisations in order to avoid a breach of covenants, but would still
leave Punch with substantial debt;

(iv)
the money was not being used to make an acquisition or some other such
purpose that may reasonably be expected to boost the share price; and

(v)
Punch’s share price had significantly recovered from its low of 32p in March
2009 and Punch was not in a position where the only possible reaction to the
issuance was for the share price to increase.

4.16. In these circumstances, it was predictable that the share price would fall. The
information received by Mr Einhorn was therefore specific enough to enable a
conclusion to be drawn as to the possible effect of the issuance on the price of Punch
shares.

The information was not generally available


4.17. There was some speculation in the market that Punch may have to raise capital by way
of new equity in or around 2009. However, public statements by Punch indicated that it
was pursuing a strategy of “self help” by disposing of assets and buying back debt at a
discount in the market.

4.18. There was no generally available information regarding the timing, size and
shareholder support for the issuance and these factors could not have been deduced
from other public information by market participants. Thus, it was not generally
available information that Punch was at an advanced stage of the process towards the
issuance of a significant amount of new equity, probably within a timescale of around a

week, with the principal purpose of repaying Punch’s convertible bond and creating
headroom with respect to certain covenants in Punch’s securitisation vehicles.

The information was likely to have a significant effect on price as it was
information which a reasonable investor would be likely to use as part of the basis
of his investment decisions

4.19. It follows from the analysis at paragraphs 4.13 - 4.16 above that a reasonable investor
would be likely to use the information disclosed to Mr Einhorn as part of the basis of
his investment decisions.

Dealing on the basis of the inside information

4.20. The FSA’s view is that Mr Einhorn’s decision to deal was based on the inside
information he received. It is sufficient that a decision to deal is materially influenced
by the inside information, it need not be the sole reason for the trading.

5.
SANCTION

5.1. DEPP 6.1.2 sets out that the principal purpose of imposing a financial penalty is to
promote high standards of regulatory and market conduct by deterring persons who
have committed breaches from committing further breaches, helping to deter other
persons from committing similar breaches and demonstrating generally the benefits of
compliant behaviour.

5.2. In enforcing the market abuse regime, the FSA’s priority is to protect prescribed
markets from any damage to their fairness and efficiency. Effective and appropriate use
of the power to impose penalties for market abuse will help to maintain confidence in
the UK financial system by demonstrating that high standards of market conduct are
enforced in the UK financial markets. The public enforcement of these standards also
furthers public awareness of the FSA’s statutory objective of the protection of
consumers, as well as deterring potential future market abuse.

5.3. DEPP 6.2.2 sets out a number of factors to be taken into account when the FSA decides
whether to take action in respect of market abuse. They are not exhaustive, but include
the nature and seriousness of the behaviour, the degree of sophistication of the users of
the market in question, the size and liquidity of the market and the susceptibility of the
market to market abuse. Other factors include action taken by the FSA in similar cases,
the impact that any financial penalty or public statement may have on financial markets
or on the interests of consumers and the disciplinary record and general compliance
history of the person concerned.

5.4. DEPP 6.4 sets out a number of factors to be taken into account when the FSA decides
whether to impose a financial penalty or issue a public censure. They are not exhaustive
but include deterrent effect, whether a person has made a profit or loss by his
misconduct, the seriousness of the behaviour and the FSA’s approach in similar
previous cases.

5.5. DEPP 6.5 (as it applied during the relevant period) sets out some of the factors that may
be taken into account when the FSA determines the level of a financial penalty that is
appropriate and proportionate to the misconduct. They are not exhaustive, but include
deterrence, the nature, seriousness and impact of the misconduct, the extent to which
the breach was deliberate or reckless, whether the person on whom the penalty is to be
imposed is an individual, his status, position and responsibilities, financial resources
and other circumstances, the amount of any benefit gained or loss avoided, the
difficulty of detecting the breach, the disciplinary record and compliance history of the
person and the action that the FSA has taken in relation to similar misconduct by other
persons.

5.6. The FSA has taken all of the circumstances of this case into account and considered the
guidance in DEPP 6 in deciding that it is appropriate in this case to take action in
respect of behaviour amounting to market abuse, that the imposition of a financial
penalty is appropriate and that the level of financial penalty is appropriate and
proportionate.

5.7. The FSA has had particular regard to the following circumstances in relation to the
behaviour attributable to Greenlight that mean a substantial financial penalty is
warranted:

(i)
Greenlight’s trading took place over a period of four days and represented a
large part of the daily volume traded in Punch shares over that period. Such
significant trading in a stock on the basis of inside information severely
undermines confidence in the market. The trading was highly visible to
market participants.

(ii)
The trading resulted in loss avoidance for the Greenlight Funds of £5.8
million.

(iii)
Greenlight is a high profile hedge fund, at which Mr Einhorn occupies a
prominent position as President.

(iv)
Mr Einhorn is an experienced trader and portfolio manager. He has had over
15 years of experience running an investment management firm and should
therefore be held to the highest standards of conduct and the highest levels of
accountability.

(v)
Given Mr Einhorn’s position and experience, it should have been apparent to
him that the information he received on the Punch Call was confidential and
price sensitive information that gave rise to legal and regulatory risk. The
Punch Call was unusual in that it was a discussion with management following
a refusal to be wall crossed. In the circumstances Mr Einhorn should have
been especially vigilant in assessing the information he received. It was a
serious error of judgement on Mr Einhorn’s part to make the decision after the
Punch Call to sell Greenlight’s shares in Punch without first seeking any
compliance or legal advice despite the ready availability of such resources
within Greenlight.

5.8. It is noted that Mr Einhorn did not deliberately or recklessly contravene the regulatory
requirements. Further, he voluntarily attended an FSA interview under caution, and
neither he nor Greenlight has previously been the subject of an adverse finding by the
FSA.

5.9. In the circumstances, the FSA has decided to impose a financial penalty on Greenlight
of £3,650,795. The financial penalty consists of the following elements:

(i)
A disgorgement of financial benefit arising from the market abuse of
£650,795 representing the losses Greenlight avoided by way of reduced
performance and management fees through the sale of Punch shares.

(ii)
An additional penalty element of £3 million.

6.
REPRESENTATIONS AND FINDINGS

6.1. Below is a brief summary of the key written and oral representations made by Mr
Einhorn on behalf of Greenlight, and how they have been dealt with. In making the
decision which gave rise to the obligation to give this notice, the FSA has taken into
account all of the representations made, whether or not explicitly set out below.

Information disclosed on the Punch Call

6.2. Mr Einhorn made representations that:

(i)
on a fair view of the Punch Call, taken as a whole and in context, and bearing
in mind relevant market practice, no inside information was conveyed.
Although the pros and cons of Punch potentially issuing equity were
discussed on the Punch Call, the discussion was high-level and conceptual.
Punch management invited Mr Einhorn’s views and engaged in debate with
him, and the discussion ended inconclusively. Punch’s management made it
clear that they were considering different alternatives, that no decisions had
been made regarding an equity issuance or other course of action, and that
Punch was continuing to operate on a ‘business as usual’ basis;

(ii)
even on the FSA’s case there was no single statement of inside information;
rather, the information comprised various comments scattered throughout the
45-minute call. Since Mr Einhorn was not aware of what Punch were actually
planning or doing, he therefore had to interpret the overall information
provided to him, taking the Punch Call as a whole. Mr Einhorn was entitled
to expect, having refused to sign an NDA and be wall crossed, that he would
not be given inside information. Although this did not mean that he could act
on inside information if he received it, in order to know whether he had
received it he interpreted what he was told in light of that expectation.
Further, there were a number of experienced professionals on the call, who
were aware of Punch’s plans, none of whom raised any concern that inside
information had been disclosed, even when Mr Einhorn stated that Greenlight
might sell its Punch shares. This suggested that nothing said on the call
should be interpreted as constituting inside information;

(iii)
it would not be fair to require Mr Einhorn, or any reasonable investor, to
deduce that they had been given inside information by making inferences and
assumptions, and ignoring the plain meanings of the words spoken to them.
Mr Einhorn was told that an NDA would last for less than a week, not that an
equity issuance was less than a week away. He was not told what the NDA
covered. He did not understand this to mean that an equity issuance was
taking place imminently, particularly since an NDA does not indicate that a
transaction is about to occur, and that a timescale of a week, as opposed to a
day, would indicate that any transaction was not yet at an advanced stage.
The fact that Punch management wanted him to sign an NDA suggested
matters were still at the discussion phase. The conversation was presented as
a hypothetical back and forth, and included a number of ‘disclaimers’ from
Punch management that it was purely conceptual. Mr Einhorn took Punch
management at their word;

(iv)
none of the parties on the call thought that inside information had been
disclosed. This supports the view that, as a matter of objective fact, no inside
information was disclosed as the information disclosed would not indicate to
a reasonable investor that an event may reasonably have been expected to
occur; and

(v)
even if inside information was, as a matter of objective fact, disclosed to Mr
Einhorn, he did not understand it. He did not know what Punch was going to
do after the call because the inside information, as formulated by the FSA,
was not a conclusion that he drew. In his view he had simply participated in a
conversation about the potential issuance of equity at some future time, about
which Punch management had made no decisions.

6.3. The FSA has found that:


(i)
taking the Punch Call as a whole and in context, it was sufficiently clear that
an equity issuance was reasonably to be expected to occur imminently.
Punch management’s comments to the contrary made that no less apparent
when taken in context;

(ii)
while there was no single statement of inside information, and some
interpretation was required, the clear interpretation of the comments made on
the Punch Call disclosed inside information;

(iii)
reasonable investors are expected to interpret comments made to them in an
appropriate manner, which may sometimes mean understanding more than
the precise words spoken, or interpreting certain comments in light of the
context. If it is sufficiently clear that a discussion is not, in fact, merely
conceptual, even express words to the contrary will not prevent inside
information from being given. In the specific circumstances of the Punch
Call it was clear that the equity issuance was imminent and that the reference
to a timetable for the NDA disclosed the anticipated timetable for the
issuance;

(iv)
the fact that none of the parties to the call raised concerns regarding the
disclosure of inside information does not affect the objective test of whether
the information disclosed was inside information. In the FSA’s view it was;
and

(v)
Mr Einhorn interpreted and understood the inside information disclosed,
notwithstanding that he did not believe that it was inside information.

Inside information

6.4. Mr Einhorn made representations that:

(i)
the information alleged by the FSA to have been disclosed on the Punch Call
did not in any event amount to inside information;

(ii)
the equity issuance was not reasonably expected to occur at the time of the
Punch Call; and

(iii)
the information lacked sufficient detail to be ‘specific’ within the meaning of
section 118C of FSMA. It lacked detail, such as regarding the type of shares
to be issued, and how and with whom they were to be placed. It was therefore
not possible to draw a conclusion as to whether the effect on the share price
would be to increase or decrease it.

6.5. The FSA has found that:


(i)
the information disclosed to Mr Einhorn on the Punch Call did amount to
inside information, for the reasons set out in detail in this Notice;

(ii)
although the equity issuance was not certain to occur, at the time of the Punch
Call, taking into account among other factors the advanced stage of
preparation of the transaction, it was reasonably expected to occur; and

(iii)
taking into account Punch’s circumstances and the information about it which
was already generally available, the information disclosed, which included
the anticipated size, purpose and timing of an equity issuance, contained
sufficient detail to enable the conclusion to be drawn that the effect on the
share price would be a decrease. The information was therefore ‘specific’.

Dealing ‘on the basis of’ inside information

6.6. Mr Einhorn made representations that:

(i)
even if inside information was disclosed on the call, he did not deal on the
basis of it. Although there was a presumption that he did so, the evidence
here showed both that he did not interpret the call in way that gave him that
information and that in fact he traded for other reasons. Mr Einhorn did not
understand the inside information disclosed, and therefore did not trade on
the basis of a conclusion that he did not reach. His reasons for trading did not
include, as a material factor, an appreciation of an imminent equity issuance.

He did not dispute that he traded on the basis of the Punch Call, but stated
that this was because the call made him lose faith in Punch as an investment,
with which he was already unhappy. In particular, Punch’s CEO stated that
the stock was fairly valued at its then-current price, which Mr Einhorn found
very surprising, and that there were ‘pluses and minuses’ unknown to the
market, that might mean the stock price would be discounted if the market
knew. Overall he found Punch management’s tone to be surprisingly
negative, and he began to doubt Greenlight’s understanding of Punch. Given
Punch’s troubled nature and the relatively small size of the position compared
to Greenlight’s overall portfolio (less than 2%), he did not believe it made
sense to stay invested when there were better uses for Greenlight’s capital;
and

(ii)
the manner of Greenlight’s actual trading evidences that it did not trade ‘on
the basis’ of the alleged inside information. The trading was not aggressive,
and in the end Greenlight still suffered a big loss at the time of the
announcement and subsequent price drop, since Greenlight still owned two-
thirds of its previous total amount of shares. If Mr Einhorn had understood
that Punch was planning an imminent equity issuance he either would have
sold much more aggressively or held all of his shares in order to vote against
the issuance and prevent it from going ahead.

6.7. The FSA has found that:

(i)
as set out above, Mr Einhorn did understand the inside information disclosed
to him. In the view of the FSA he has not rebutted the presumption that he
dealt on the basis of that information. Although the FSA accepts that Mr
Einhorn may have had more than one reason for trading, he has not shown
that the equity issuance did not play a material part in that decision; and

(ii)
while Greenlight’s selling was not as aggressive as it could have been, it still
disposed of around one third of its Punch shares within a matter of days,
resulting in an avoidance of loss of over £5 million.

Section 123 of the Act

6.8. Mr Einhorn made representations that:

(i)
he took all reasonable precautions and exercised all due diligence to avoid
committing, and reasonably believed that he had not committed, market
abuse. He refused to be wall crossed, and relied on Punch management and
the other insiders on the Punch Call not to give him inside information, or to
tell him if they inadvertently did so. None of the experienced parties on the
call raised any concerns, even after he stated that he was considering selling
Punch shares. Punch management told him that they were talking only in
general terms and having an in-concept discussion – as a matter of market
practice it was reasonable for him to place considerable weight on those
disclaimers. Further, towards the end of the call he asked if the decision to
issue equity had been made and was told that no formal decision had been
made, and that the firm was consulting with various parties. He was also still
being told at the end of the call that he was not wall crossed. He took these

comments as confirmation that he was ‘nowhere close’ to having inside
information; and

(ii)
he did not consult with internal or external compliance staff because he
believed, reasonably and in good faith, that there was nothing to consult
about. Further, the sell order was relayed to the trader who served as
Greenlight UK’s compliance officer, and the sales were vetted by
Greenlight’s in-house counsel to make sure that the necessary regulatory
filings were made.

6.9. The FSA has found that:

(i)
Although Mr Einhorn’s approach to the Punch Call is not criticised,
following the call Mr Einhorn should have been aware that he had been given
inside information, or at the very least that there was a risk of this. He had a
responsibility to consider whether the information received during the call
constituted inside information before instructing the sale of shares. Given that
the call took place following Mr Einhorn’s refusal to sign an NDA, Mr
Einhorn should have been even more diligent than usual in considering
whether inside information had been disclosed to him before selling. Having
received the information, although it is accepted that he did not believe that it
was inside information, before dealing he should have taken steps to ensure
that it was not before dealing, such as obtaining compliance or legal advice,
or contacting Punch management again to specifically clarify whether the
information he had been given was inside information. Although he was
entitled to give some weight to the fact that neither Punch [REDACTED]
raised any concerns either during or immediately after the call, that does not
remove the obligation on Mr Einhorn to remain alert to the risk, make his
own assessment of any information he received, and take steps as necessary
to confirm it. That the trading was subject to Greenlight’s usual processes for
dealing does not mitigate these failings; and

(ii)
in the absence of these necessary further steps, it cannot be said that Mr
Einhorn took all reasonable precautions and exercised all due diligence to
avoid committing market abuse, nor that his honestly-held belief that he was
not committing market abuse was reasonable.

Penalty

6.10. Mr Einhorn made representations that:

(i)
deterrence should not be a significant factor in determining the penalty in this
case, since there is no evidence of a material risk of these circumstances
being replicated. A private warning or disgorgement-only penalty would be
sufficient. A significant penalty is impossible to reconcile with the finding
that the conduct was not deliberate;

(ii)
bearing in mind the penalties imposed in other FSA cases, the penalty
imposed on Greenlight should be much lower; and

(iii)
any breach was not deliberate or reckless, but totally accidental. If Mr
Einhorn had thought he was “anywhere close to the line” he would not have
traded. In the circumstances this was, at worst, an understandable
misjudgement.

6.11. The FSA has found that:

(i)
the trading in this case was very significant in terms of volume, highly
visible, and related to a large public company. Although the market abuse
was inadvertent, it is appropriate and necessary to deter similar errors of
judgement in relation to inside information, both in the same circumstances
and more generally, through the imposition of a significant penalty;

(ii)
any penalty must be sufficiently substantial to be meaningful, and act as a
credible deterrent, to highly visible and influential investors like Greenlight,
who have a significant involvement in the markets and commensurate access
to company management. Such market participants must act with due
caution when liaising with companies and their brokers; and

(iii)
Mr Einhorn did not act deliberately or recklessly. However, having been
asked to and having refused to sign an NDA, with knowledge that the subject
of the Punch Call with management and its advisors was the issuance of
equity, Mr Einhorn, a highly experienced market professional, should have
recognised that there was a real risk of inside information being disclosed to
him, and that extreme caution would be required before any trading following
the call. His failure to apply the necessary care and rigour, while
unintentional, was an extremely serious matter, and warrants a substantial
penalty.

7.
DECISION MAKER

7.1. The decision which gave rise to the obligation to give this notice was made by the
Regulatory Decisions Committee.

8.
IMPORTANT

8.1. This Decision Notice is given to Greenlight under section 127 and in accordance with
section 388 of the Act. The following statutory rights are important.

The Tribunal

8.2. Greenlight has the right to refer the matter to which this Decision Notice relates to the
Upper Tribunal (the “Tribunal”). Under paragraph 2(2) of Schedule 3 of the Tribunal
Procedure (Upper Tribunal) Rules 2008, Greenlight has 28 days from the date on which
this Decision Notice is given to it to refer the matter to the Tribunal. A reference to the
Tribunal is made by way of a reference notice (Form FTC3) signed on behalf of
Greenlight and filed with a copy of this Notice. The Tribunal’s address is: The Upper
Tribunal, Tax and Chancery Chamber, 45 Bedford Square, London WC1B 3DN (tel:
020 7612 9700; email financeandtaxappeals@tribunals.gsi.gov.uk). Further details are

contained in “Making a Reference to the UPPER TRIBUNAL (Tax and Chancery
Chamber)” which is available from the Upper Tribunal website:

8.3. Greenlight should note that a copy of the reference notice (Form FTC3) must also be
sent to the FSA at the same time as filing a reference with the Tribunal. A copy of the
reference notice should be sent to Helena Varney at the FSA, 25 The North Colonnade,
Canary Wharf, London E14 5HS.

Access to evidence


8.4. Section 394 of the Act applies to this Decision Notice. In accordance with section 394,
Greenlight is entitled to have access to:

(a)
the material upon which the FSA has relied in deciding to give Greenlight this
notice; and

(b)
any secondary material which, in the opinion of the FSA, might undermine that
decision.

There is no such secondary material.

Confidentiality and publicity

8.5. Greenlight should note that this Decision Notice may contain confidential information
and should not be disclosed to a third party (except for the purpose of obtaining advice
on its contents). The effect of section 391 of the Act is that Greenlight may not publish
the notice or any details concerning it unless the FSA has published the notice or those
details. The FSA may publish such information about the matter to which a Decision
Notice or Final Notice relates as it considers appropriate. Greenlight should be aware,
therefore, that the facts and matters contained in this notice may be made public.

8.6. For more information concerning this matter generally, Greenlight should contact either
Helena Varney at the FSA (direct line: 020 7066 1294) or Sadaf Hussain (direct line:
020 7066 5768).

Tim Herrington
Chairman, Regulatory Decisions Committee


ANNEX 1

RELEVANT STATUTORY PROVISIONS AND REGULATORY GUIDANCE

Statutory provisions

1.
Market Abuse is defined at Section 118(1) of the Act as follows:

For the purposes of this Act, market abuse is behaviour (whether by one person
alone or by two or more persons jointly or in concert) which:-
(a) occurs in relation to –
(i) qualifying investments admitted to trading on a prescribed market …and
(iii) in the case of subsection (2) or (3) behaviour, investments which are related
investments in relation to such qualifying investments, and
(b) falls within any one or more of the types of behaviour set out in subsections
(2) to (8).

2.
“Related investments” are defined at section 130A(3) as “an investment whose price
or value depends on the price or value of the qualifying investment.”

3.
Section 118(2) sets out the behaviour that will amount to insider dealing:

… where an insider deals or attempts to deal, in a qualifying investment or related
investment on the basis of inside information relating to the investment in
question.

4.
Section 118B of the Act provides as follows:

… an insider is any person who has inside information:…
(c) as a result of having access to the information through the exercise of his
employment, profession or duties.

5.
Section 130A of the Act defines dealing as follows:

in relation to an investment, means acquiring or disposing of the investment
whether as principal or agent or directly or indirectly, and includes agreeing to
acquire or dispose of the investment, and entering into and bringing to an end a
contract creating it.


6.
Section 118C(2) sets out the requirements for information to be inside information:


Inside information is information of a precise nature which:
(a) is not generally available;
(b) relates, directly or indirectly, to one or more issuers of the qualifying
investments or to one of more of the qualifying investments;
(c) would, if generally available, be likely to have a significant effect on the price
of the qualifying investments.


7.
Section 118C(5) states that information will be precise if it:

(a) indicates circumstances that exist or may reasonably be expected to come into
existence or an event that has occurred or may reasonably be expected to occur,
and
(b) is specific enough to enable a conclusion to be drawn as to the possible effect
of those circumstances or that event on the price of qualifying investments or
related investments.

8.
Section 118C(8) of the Act states that:

Information which can be obtained by way of research or analysis conducted by,
or on behalf of, users of a market is to be regarded, for the purposes of this Part,
as being generally available to them.

9.
Section 118C(6) of the Act sets out when the information will have a significant effect
on price:

Information would be likely to have a significant effect on price if and only if it is
information of a kind which a reasonable investor would be likely to use as part
of the basis of his investment decisions.

10.
Section 123(1) of the Act states:

If the Authority is satisfied that a person (“A”)—

(a) is or has engaged in market abuse, or
(b) by taking or refraining from taking any action has required or encouraged
another person or persons to engage in behaviour which, if engaged in by A,
would amount to market abuse,

it may impose on him a penalty of such amount as it considers appropriate.

11.
Section 123(2) of the Act states that the Authority may not impose a penalty for
market abuse in certain circumstances:

But the Authority may not impose a penalty on a person if … there are reasonable
grounds for it to be satisfied that –
(a) he believed, on reasonable grounds, that his behaviour did not fall within
paragraph (a) or (b) of subsection (1), or
(b) he took all reasonable precautions and exercised all due diligence to avoid
behaving in a way which fell within paragraph (a) or (b) of that subsection.


The Code of Market Conduct

12.
The FSA has issued the Code of Market Conduct (“MAR”) pursuant to section 119 of
the Act. In deciding to take the action set out in this notice, the FSA has had regard to
MAR and other guidance published in the FSA Handbook.

13.
MAR 1.2.3 G states that it is not a requirement of the Act that the person who
engaged in the behaviour amounting to market abuse intended to commit market
abuse.

14.
MAR 1.2.9 G states that in order for an individual to be an insider under subsection
118B(c) of the Act, it is not necessary for the person concerned to know that the
information in question is inside information

15.
MAR 1.2.12 E sets out factors that are to be taken into account in determining
whether or not information is generally available, each of which indicate that the
information is generally available (and therefore that it is not inside information):

•
Whether the information has been disclosed to a prescribed market through a
regulatory information service or otherwise in accordance with the rules of
the market.

•
Whether the information is contained in records which are open to inspection
by the public.

•
Whether the information is otherwise generally available, including through
the Internet, or some other publication (including if it is only available on
payment of a fee), or is derived from information which has been made public.

•
Whether the information can be obtained by observation by members of the
public without infringing rights or obligations of privacy, property or
confidentiality; and

•
The extent to which the information can be obtained by analysing or
developing other information which is generally available.

16.
MAR 1.2.13 E states that in relation to the factors it sets out, information is “generally
available” even if only available outside the UK. Further, information is “generally
available” even if the observation or analysis is only achievable by a person with
above average financial resources, expertise or competence (other than in relation to
information contained in records open to inspection by the public).

17.
MAR 1.3.3 E sets out factors that are to be taken into account in determining whether
or not a person’s behaviour is “on the basis of” inside information and sets out a
number of factors that are indications that it is not (none of which are relevant to the
facts of this case).

Decision Procedures and Penalties Manual (“DEPP”)

18.
Section 123(1) of the Act authorises the FSA to impose financial penalties in cases of
market abuse. Section 124 of the Act requires the FSA to issue a statement of its
policy with respect to the imposition of penalties for market abuse and the amount of
such penalties. The FSA’s policy in this regard is contained in Chapter 6 of DEPP.

19.
In deciding whether to exercise its power under section 123 in the case of any
particular behaviour, the FSA must have regard to this statement of policy. Therefore,

in determining the penalty to be imposed on Greenlight, the FSA has had regard to
DEPP 6 as it applied in June 2009.

20.
With regard to defences to a penalty for market abuse under section 123(2) of the Act,
DEPP 6.3.2 G sets out factors that the FSA may take into account in determining
whether the conditions of 123(2) are met:

(1) whether, and if so to what extent, the
in question was or was
behaviour

not analogous to
described in the
(see
behaviour
Code of Market Conduct

MAR 1) as amounting or not amounting to
or
market abuse
requiring or

encouraging;

(2) whether the
has published any
or other materials on the
FSA
guidance

behaviour in question and if so, the extent to which the
sought to follow
person

that
or take account of those materials (see the Reader's Guide to
guidance

the
regarding the status of
.) The
will consider the
Handbook
guidance
FSA

nature and accessibility of any
or other published materials when
guidance

deciding whether it is relevant in this context and, if so, what weight it should
be given;

(3) whether, and if so to what extent, the
complied with the rules of
behaviour

any relevant
or any other relevant market or other
prescribed market

regulatory requirements (including the
) or any relevant codes
Takeover Code

of conduct or best practice;

(4) the level of knowledge, skill and experience to be expected of the

person

concerned;

(5) whether, and if so to what extent, the
can demonstrate that the
person

behaviour was engaged in for a legitimate purpose and in a proper way;

(6) whether, and if so to what extent, the
followed internal
person

consultation and escalation procedures in relation to the
(for
behaviour

example, did the
discuss the
with internal line management
person
behaviour

and/or internal legal or compliance departments);

(7) whether, and if so the extent to which, the
sought any appropriate
person

expert legal or other expert professional advice and followed that advice; and

(8) whether, and if so to what extent, the
sought advice from the
person

market authorities of any relevant
or, where relevant,
prescribed market

consulted the
, and followed the advice received
Takeover Panel