Heinz trading sparks red alert
REGULATORS froze a Swiss account at Goldman Sachs on Friday after unearthing activities suggestive of insider trading in the $US23 billion ($A22.3 billion) acquisition of H.J. Heinz, taking an abrupt action after one of the biggest deals in recent years.
The action, by the Securities and Exchange Commission (SEC), illustrates the temptation that such big takeovers may present.
Despite a number of prominent crackdowns on insider trading, regulators continue to uncover cases involving traders who spin confidential titbits into illicit profits ahead of deals.
On Thursday, Berkshire Hathaway and the investment firm 3G Capital agreed to buy Heinz, a deal that sent the company's shares soaring.
In a complaint in US District Court in Manhattan, the agency took aim at a Zurich-based account that on paper reaped $US1.7 million in gains after the stock jumped. Freezing the account, the SEC said, will prevent the traders from spending their winnings or moving the money.
But the identity of the traders, who funnelled their bets through a Goldman Sachs customer account, is not yet clear. An SEC statement referred only to "unknown traders" who bought a series of options tied to Heinz's stock. The agency's investigation is continuing. Goldman, which is not accused of wrongdoing, was the conduit for the trades.
"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag that traders may be improperly acting on confidential non-public information," the head of the commission's market abuse unit, Daniel Hawke, said.
The agency's complaint portrayed a brazen attempt by traders to abuse their position as keepers of market-moving secrets.
Dozens of people had knowledge of confidential information about the deal, including bankers, lawyers and executives at both the buyers and the seller.
The inquiry may cast a cloud over the Heinz deal. Once the traders are identified, the focus will turn to the universe of insiders who could have leaked details of the deal.
Goldman said it was co-operating with the SEC's investigation.
The SEC opened the inquiry on Thursday, focusing on a "highly suspicious" spike in options trading.