Thursday, July 20, 2006

Can't Stop the Insider Trading

The SEC's role policing insider trading continued with a complaint filed in federal court in San Diego freezing the accounts of unknown call option purchasers of Petco before the leveraged buy-out announced on July 14 at $29 per share, a nearly 50% premium over its market price.  The SEC complaint (currently unavailable) alleges that purchasers through accounts in the United Kingdom and Switzerland accounted for more than 70% of the trading volume in July $22.50 and August $20 call options, and the purchases began at the end of June.  The July $22.50 options are particularly aggressive because they would expire in less than a month, were well out of the money, and the buying was into a down market at the time.  A Bloomberg story (here) notes that the district court issued a temporary asset freeze to keep $862,000 in proceeds from leaving the country, where it likely would have disappeared.  This is the second case in a little over a month involving call options purchased by overseas traders, similar to the Maverick Tube case involving purchasers in Argentina and Uruguay (see earlier post here).  Like all unknown purchaser cases, the SEC will have to link the purchasers to the inside information about the deal, so stay tuned for further developments. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/07/cant_stop_the_i.html

Civil Enforcement, Fraud, Insider Trading, Securities | Permalink

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Comments

Stay tuned, indeed!

Thanks for covering this story. It's nice to know that Mr. Lee's guys and gals are so PRO(active).

To quote Linda Thomsen, after Biogen-Idec's former General Counsel settled up on inside trading charges filed by Walter Ricciardi's guys and gals in Boston, "I guess not," in response to a "they never learn, do they?" e-mail praising Walter Ricciardi and team.

Posted by: PRO(active) SEC/NASD Enforcement Bull | Jul 20, 2006 6:43:30 AM

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