Analyst fined £50k over Enterprise Inns message
The Financial Services Authority (FSA) has fined a City analyst £50,000 for making what it called "misleading and inaccurate disclosures to the market about Enterprise Inns", which it said had "substantially impacted" the pubco's share price.
The FSA said that on May 7, 2008, Christopher Gower, a former senior research analyst working for MF Global Securities Limited and MF Global UK Limited, met with Giles Thorley, then the chief executive of Punch Taverns.
During the meeting the pair discussed an application made by Enterprise Inns to Her Majesty's Revenue and Customs (HMRC) for approval to convert to a Real Estate Investment Trust (REIT). The Authority said the discussion concerned solely information which was in the public domain.
After the meeting, Gower sent a Bloomberg instant message to 14 clients of MF Global, plus a Bloomberg reporter and MF Global equity salesmen: "*** HOT OFF PRESS*** Just had meeting with CEO of PUNCH TAVERNS. They have heard from HM Revenue & Customs that it is highly likely Enterprise Inns has been granted REIT status and ETI are due to announce this on 13th May at interims. Expect ETI to bounce (was up 10% on previous HMRC news) BUT then fall back as mkt realises it will take time to implement.... MORE on my meeting to follow.... Chris".
On May 8, 2008, Enterprise's shares closed more than £1 higher, trading at just shy of £5 each.
The FSA said Gower's message did not accurately reflect the conversation he had had with Thorley. It gave the impression of containing inside information although, in fact, Gower had no such information; was misleading and inaccurate, and was rapidly circulated widely in the market, contributing to what it called "a substantial increase in the volume of Enterprise shares traded".
Gower, the FSA added, gave no apparent consideration to the consequences to the market of his message. "His conduct was careless and fell below proper standards of conduct in the circumstances," it added.
Margaret Cole, the FSA's managing director of enforcement and financial crime, said there was no excuse for a senior retail analyst to be so careless with messages that could have such an impact on the market.
"Gower's dissemination of inaccurate information contributed to a large increase in the volume of shares traded and a disorderly market in ETI shares.
"Maintaining market confidence is one of our key objectives and we hope that the fine imposed in this case will act as a reminder to approved persons of their obligations to ensure markets are not provided with careless misinformation," she added.
The FSA said it accepted that Gower did not intend to give the impression that this was inside information but concluded he failed to observe proper standards of market conduct, hence the fine of £50,000.
