The Securities and Exchange Commission is alleging insider trading in connection with the recent sale of underwater oil company Global Industries.
"Unknown purchasers" bought 685,840 shares of Global Industries stock just days before the $937 million Technip takeover. The day of the merger's public announcement, the shares were sold for a $1.73 million profit .
Regulators believe that the purchasers obtained insider information as a result of a breach of fiduciary duty. There was no public news to explain the transaction's size (10% of the company's daily trading volume).
It's also possible that defendants learned the confidential information first hand. The transactions were made in the name of Austria's Raiffeisen Bank, reports Reuters. The bank has explained that they were made by an omnibus account through a counterparty.
A federal court has ordered the purchasers to identify themselves and preserve records, according to Bloomberg. Thus far no one has come forward.
Though it's likely the trade's size would have previously raised suspicions, this lawsuit is a reminder that companies must now operate in a Dodd-Frank era.
Increased vigilance, enforcement mechanisms and funding are changing the game, and few are getting out unscathed.
Prosecutors are seeking between 20 and 25 years for Raj Rajaratnam. Earlier this week, the SEC accused a former Goldman Sachs trader and his father of making illegal trades. And just last week, the agency announced an investigation into trades made just before the country's credit downgrade.
The Global Industries allegations might be the perfect way to remind all employees about their fiduciary duties.
- Investors accused in Global takeover (Financial Times)
- Associate Charged in $32M Insider Trading at 3 BigLaw Firms (FindLaw's Greedy Associates)
- Billionaire Raj Rajaratnam Guilty in Insider Trading Case (FindLaw's Decided)