UK regulator the Financial Services Authority has levied a substantial penalty on Ravi Shankar Sinha, the former chief executive of US buyout group JC Flowers’ London operation, for defrauding a unnamed portfolio company. Sinha was on Tuesday fined £2.87 million ($4.5 million ; €3.4 million) by the FSA, and banned from ever working in the financial services industry again.
Sinha left JC Flowers in 2009, and was replaced by the firm's Australia head David Morgan. The firm could not be reached for comment at press time.
Sinha's fine comprises £1.37 million, which covers the amount he fraudulently obtained from a JC Flowers portfolio company, together with a punitive element of £1.5 million, the FSA said in a statement.
“The financial crisis led to a very significant deterioration in Sinha’s financial position from 2007 onwards,” the FSA said. “He borrowed heavily to finance investments whose performance declined and left him unable to service his debts.
“In response to his deteriorating financial position, between 17 February and 26 October 2009 Sinha issued invoices to a company, in which the JCF Funds had invested, for fees payable to himself, to which he knew he was not entitled. In order to secure payment of the invoices, Sinha deliberately misled the company’s chief executive by claiming that the payments had been authorised and approved by JCFUK, when in fact no such authorisation or approval had been sought or given. In addition, Sinha dishonestly concealed from JCFUK the fact that he had received the payments from the company,” it added.
Sinha becomes the latest in a long line of dishonest individuals who have found themselves facing substantial fines and being banned from working in financial services
Tracey McDermott, acting director of enforcement and financial crime at the FSA, emphasised the regulator’s tough stance on law-breakers.
“Sinha exploited his position of trust to fraudulently obtain significant sums for his personal benefit. He engaged in a dishonest, deliberate and sustained course of misconduct which lasted for several months. Such behaviour has no place in the financial services industry.
“Sinha becomes the latest in a long line of dishonest individuals who have found themselves facing substantial fines and being banned from working in financial services. Those who take on the responsibility of being an approved person should be in no doubt about our commitment to take the strongest action to tackle such behaviour – wherever we find it,” she said.
Sinha’s censure comes a week after the FSA fined US hedge fund Greenlight Capital £7.3 million for market abuse. Greenlight’s owner David Einhorn benefited from inside information about an equity fundraising by UK-listed Punch Taverns in 2009. Minutes after receipt of the inside information, Einhorn instructed that Greenlight sell its 13.3 percent holding in Punch. Its share price plummeted by 30 percent after the announcement of its fundraising. By that point, Greenlight had reduced its holding from 13.3 percent to 8.9 percent, thereby avoiding losses of about £5.8 million, the FSA said. It added that £3.6 million of the fine was levied against Einhorn personally, with £3.7 million charged to the firm.