French AMF Fines US Investment Fund €10 Million for Nasdaq IPO Price Manipulation

The French Financial Markets Authority (Autorité des Marchés Financiers, AMF) Enforcement Committee has levied fines totaling €10 million against EcoR1 Capital, a San Francisco-based investment fund, and its director, Oleg Nodelman, for price manipulation during the initial public offering (IPO) of French biotech firm Innate Pharma on the Nasdaq.

The decision, issued on December 13, 2024, includes a €7 million fine against EcoR1 for manipulating the pricing of Innate Pharma shares and breaching reporting obligations, alongside a €3 million penalty imposed on Mr. Nodelman for his role in the misconduct.

EcoR1 specializes in investments in small biotechnology firms and, in 2019, was a shareholder in Innate Pharma, which was listed on Euronext Paris. In October 2019, Innate Pharma announced its IPO on the Nasdaq via American Depositary Shares (ADSs), with the subscription price calculated as the weighted average of the closing price of its shares on Euronext Paris over five trading sessions.

During these five sessions, EcoR1 executed a series of transactions on Euronext Paris, selling a significant volume of Innate Pharma shares. These sales, timed to occur around market close, artificially depressed the closing price of the shares on Euronext Paris. At the same time, EcoR1 emerged as the largest subscriber of the ADSs on the Nasdaq, benefiting from the manipulated lower subscription price.

The AMF found these transactions constituted illegal price manipulation, creating an artificial pricing mechanism that undermined market integrity.

Failure to Report Ownership Thresholds

In addition to the price manipulation, EcoR1 was found to have twice violated French securities regulations by failing to report that its holdings in Innate Pharma’s capital and voting rights had first exceeded, and then fallen below, the 5% threshold required for disclosure.

The AMF held Mr. Nodelman, EcoR1’s director, directly accountable for the violations, underscoring the importance of individual responsibility in preventing market abuses.

“It is critical that all market participants, including those operating cross-border, adhere to stringent regulatory standards to ensure fairness and transparency in capital markets,” the AMF stated.

Implications for Cross-Border Compliance

This case highlights the challenges of navigating dual-listed securities and the potential risks posed by cross-border transactions. With Innate Pharma’s shares listed on both Euronext Paris and the Nasdaq, the misconduct exploited the interplay between the two markets, demonstrating the critical need for robust oversight.

The AMF’s decision sends a clear message to international funds engaging in French markets that price manipulation and reporting failures will not be tolerated, regardless of geographical base.

EcoR1 and Mr. Nodelman retain the right to appeal the decision. However, the fines underscore the AMF’s commitment to maintaining market integrity and ensuring compliance with reporting obligations.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.