Asset Freeze Obtained Against 3 Swiss Firms Charged with Insider Trading

Jack Humphrey, Regulatory journalist
July 19, 2011 /

The Securities and Exchange Commission has obtained asset freezes and other emergency relief against three Swiss-based entities for engaging in insider trading.

The SEC previously charged Compania International Financiera S.A., Coudree Capital Gestion S.A., and Chartwell Asset Management Services with insider trading for purchasing more than a million common shares of Arch between July 5 and July 8 ahead of the public announcement on July 11.

More recently, the SEC charged Donald Johnson of Ashburn, Va., a former managing director of The NASDAQ Stock Market for illegally trading on confidential information while working in a specialized department within the NASDAQ Stock Market’s Corporate Client Group (CCG).

Non-public information related to the acquisition of Connecticut-based Arch Chemicals Inc. by Swiss-based Lonza Group Ltd was leaked to these companies before the July 11 announcement, immediately after which the embattled firms allegedly began selling the recently-purchased shares of Arch common stock for millions of dollars in profits.

According to the SEC’s complaint, at the time the three entities purchased their Arch shares, they are believed to have been in possession of material, non-public information about Lonza’s proposed acquisition of Arch.

“The SEC’s swift action to secure a judicial freeze order only four days after the observation of suspicious trading prevented millions of dollars from moving offshore,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

In filing its complaint in U.S. District Court for the Southern District of New York which seeks emergency relief, the SEC noted that because the defendants are foreign entities who placed their trades in overseas accounts, “there was a substantial risk that, upon clearance at U.S. brokerage firms, the proceeds of the trades would likely be transferred overseas.”

Kevin Castel, acting as emergency judge, granted the SEC’s requested relief late in the day on July 15.

The court’s order froze certain assets of the defendants and ordered repatriation of all assets obtained from the trading described in the SEC’s complaint, among other things.

The court scheduled a preliminary injunction hearing in this matter for July 25, with Denise Cote as the presiding judge.

The SEC’s investigation was conducted by Assistant Regional Director Silvestre Fontes, Assistant Regional Director Sandra Bailey, and Senior Counsel Thomas Rappaport with assistance from the Division of Enforcement’s Market Abuse Unit headed by Daniel Hawke.

The litigation will be conducted by Michael Foster.

The SEC acknowledged the assistance of the FINRA Office of Fraud Detection and Market Intelligence in its investigation.


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