French markets regulator fines hedge fund Elliott €20m

The French markets regulator has levied one of the largest fines in its history against activist hedge fund Elliott Management, imposing a €20m penalty for obstructing an investigation into a takeover bid and not adequately disclosing its positions.

The Autorité des Marchés Financiers said on Wednesday that it had fined Elliott over “inaccurate and late reports” filed in connection with a tender offer in 2015 by XPO logistics for Norbert Dentressangle, a French logistics group.

It also said that Elliot’s UK arm “had obstructed the AMF’s investigation.”

The investigation centred on Elliott’s then investment in Norbert Dentressangle, which was in the process of being taken over by US rival XPO. Elliott took a position in the target company in the hope of winning a higher price from the buyer. 

The AMF focused on whether Elliott correctly disclosed the size and nature of its positions to the regulator. This is required in France when an investor holds a significant amount of shares in a company subject to a takeover offer.

The AMF found that Elliott failed to accurately report the kind of instruments through which it held the shares, declaring they were one type when they were another. This harmed other minority shareholders by depriving them of information, the regulator said, and impeded the proper functioning of the market.

In “reporting that the transactions at stake involved cash-settled CFDs [contracts for difference] when they actually involved equity swaps, the respondents had filed inaccurate reports on the nature of the financial instruments acquired as part of this investment,” said the AMF statement.

It also found that Elliott had “declared belatedly . . . its intention not to tender the Norbert Dentressangle securities to the offer.”

The AMF said that the size of the fine against Elliott reflected “the fact that the inaccurate reportings and the delay in submitting a declaration of intent to the AMF were intended to conceal from the market, for as long as possible, the strategy of blocking the squeeze-out offer in order to negotiate a reassessment of XPO’s offer price”.

A “squeeze out” involves the compulsory sale of the shares of minority shareholders when a certain threshold of ownership in a company has been reached.

The regulator added that Elliott had also “already been fined €8m by the Committee in 2014 in an insider trading case”.

The only other fines of a similar size levied by the AMF to date were against Natixis Asset Management and Morgan Stanley in separate cases. The US bank received a €20m fine in December while two years ago Natixis AM was fined a record €35m, later reduced to €20m.

AMF has said the decision may be appealed. Elliott declined to comment. People familiar with the fund’s thinking said it is reviewing the decision, seeking to understand its reasoning and will review options with its lawyers.

The fine comes amid an uptick in investor activism in France and elsewhere in continental Europe, driving politicians, companies and regulators to wrestle with how to respond to the increase in activity.

Elliott is currently involved in a campaign at French spirits group Pernod Ricard, while another US hedge fund, Dan Loeb’s Third Point, has taken a stake in eyewear group EssilorLuxottica. Amber Capital, a London-based activist, is pushing for changes at media group Lagardère and waste and water utility Suez. 

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