Securities Law Prof Blog

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

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Tuesday, June 9, 2009

SEC Charges Swiss National with Insider Trading in connection with 2006 GlaxoSmithKline Merger

The SEC filed charges against Lorenz Kohler (Kohler), a resident of Mels, Switzerland, and Swiss Real Estate International Holding AG (Swiss Real Estate) alleging that they engaged in insider trading in advance of the October 9, 2006 public announcement of a $566 million merger between CNS and GlaxoSmithKline plc. The Complaint alleges that Kohler purchased out-of-the-money call options in CNS in his personal account and in an account in the name of Swiss Real Estate, a company controlled by Kohler, based on material non-public information relating to the company's potential acquisition. The Commission alleges that Kohler and Swiss Real Estate realized illicit gains of approximately $387,566. The Commission further alleges that Kohler tipped his wife and his brother-in-law, who then traded in CNS options in advance of the announcement of the acquisition of CNS and realized significant illicit gains.  According to the Complaint, Kohler has engaged in a pattern of highly suspicious trading both prior to and immediately after the trades in CNS securities that are charged in the Complaint. During late 2005 and 2006, Kohler and a group of his friends and relatives also traded in the securities of five other public companies in advance of acquisitions or earnings announcements. The Complaint alleges that Kohler and his circle of traders realized over $5 million in profits on these trades.

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