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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, May 14, 2007

SEC Adds Tippee Defendant in TXU Insider Trading Case

On May 11, the Commission charged Ajaz Rahim, a Pakistani  banker  who  was employed by Faysal Bank in Karachi, Pakistan with insider  trading based on material,  non-public  information  he  received  from  Hafiz Naseem, an employee of Credit Suisse (USA) LLC in New York. In amending its complaint to add Rahim as a  defendant, the SEC alleged that, on Feb. 5, 6, 7, 8 and 23, 2007,  Naseem telephoned Rahim and conveyed to him non-public, material information  concerning the proposed but unannounced leveraged  buyout  of  TXU  Corp. and that Rahim, on Feb. 23, 2007, purchased 6,700  TXU  call  option contracts and 15,000 shares of TXU stock.  According to the Commission, these purchases allowed  him  to reap, following the public announcement of the buyout, trading profits of approximately $5.1 million.  The complaint also alleges that Naseem alerted  him to pending business combinations and deals involving 9 other  issuers for which Credit Suisse  served  as  an  investment    banker or financial advisor,  obtaining   profits   of $2,425,000. Finally, according to the complaint, Naseem, in order to insure he would obtain a personal, financial benefit  from his misappropriations, in May 2006 opened up a  brokerage  account  in Pakistan and granted trading authority over that account to Rahim, his "tippee."

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