SEC sues Spaniards over insider trading

SEC sues Spaniards over insider trading

By Kara Scannell in New York and Tobias Buck in Madrid

US securities regulators brought a new round of cases of alleged insider trading ahead of BHP Billiton’s failed bid for PotashCorp filing fraud charges against a former high-ranking executive at Banco Santander and a former Spanish judge.
The Securities and Exchange Commission sued Cedric Cañas Maillard, a Spanish citizen and former executive adviser to Santander’s chief executive, and his friend Julio Marín Ugedo, a former judge in Spain, for allegedly making a total of $1m in illegal profits after trading in advance of the planned 2010 takeover.
The lawsuit, filed in New York, is the latest case where the SEC has charged individuals based outside of the US for illegal stock trading. Earlier this year the SEC sued a Thai trader with buying securities of Smithfield Foods days before the US pork producer announced its takeover by China’s Shuanghui International. That case is ongoing.
The SEC has previously charged two traders with insider trading around the BHP takeover bid. The agency settled with one of them, a former Santander analyst, who agreed to pay $625,000, without admitting or denying wrongdoing. But a US judge threw out its case against the second man, a Spanish citizen, for lack of evidence. The SEC said its investigation is ongoing.
Santander declined to comment. The bank launched an internal investigation in 2010 and by January 2011 suspended Mr Cañas after allegations he had access to confidential information about the takeover bid, the SEC said. He is no longer with the bank. The SEC is seeking disgorgement of profits and penalty from both men, neither of them could be reached for comment.
According to the SEC, Mr Cañas allegedly learnt about the takeover attempt after BHP contacted Santander to line up financing for the acquisition in August 2010. He allegedly bought the equivalent of 30,000 shares of Potash stock by using contracts for difference, highly leveraged securities that trade outside of the US and which closely track securities listed on US exchanges, the SEC said.
If the price of the CFD rises, the buyer of the contract is paid the difference by the seller. By buying the contract, Mr Cañas was betting Potash shares would rise in value.
The SEC alleges Mr Cañas spoke, text messaged and emailed his childhood friend Mr Marin multiple times during the period of the takeover. Mr Marin “admitted that he discussed investing in Potash with Cañas in August 2010 before purchasing Potash stock,” the SEC alleged.
Mr Marin allegedly began buying shares of Potash the day after Santander’s executive committee approved $10.5bn in financing for BHP. He made $87,132 from his trades, the SEC said.