Embattled Analyst Settles Insider Trading Suit After 8 Months

Jack Humphrey, Regulatory journalist
April 25, 2011 /

A former analyst at Banco Santander SA has settled on April 25 the charges of insider trading filed by the US Securities and Exchange Commission on August 2010, including a trader in Spain.

Juan Jose Fernandez Garcia from Madrid, Spain conceded to the more than $625,000 settlement with the SEC for illegally trading material non-public information about a company that Santander advised.

Meanwhile, the jury in another insider trading case involving Galleon Group hedge fund founder Raj Rajaratnam reached a final verdict yesterday. Southern District Judge Richard Holwell charged Rajaratnam with five counts of conspiracy and nine counts of securities fraud.

Rajaratnam was previously sued by the SEC for illegally trading in the stocks of several companies using confidential information, generating $63.5 million of ill-gotten gains from 2003 to 2008.

Commenting on the concession made by Garcia, SEC’s Market Abuse Unit head Daniel Hawke said: “This concludes our emergency action against Garcia and demonstrates that the Commission will act swiftly to prevent foreign citizens who commit fraud in the U.S. securities markets from reaping the profits of their illegal activity.”

In August, the SEC obtained an emergency court order freezing the assets of Garcia and Luis Martin Caro Sanchez held in Garcia’s brokerage account at Interactive Brokers LLC. The order was enforced after they profited nearly $1.1 million by trading in advance of the public announcement of a multi-billion dollar cash tender offer by BHP Billiton Plc to acquire Potash Corp. of Saskatchewan Inc.

Garcia served as head of a research arm at Banco Santander Group that then advised BHP on its bid.

According to the SEC, Garcia and Sanchez spent together more than $61,000 to buy 282 call option contracts in U.S. brokerage accounts. They allegedly sold their options shortly after BHP’s offer was publicly announced on August 17, profiting more than a million dollar.

Garcia did not admit or deny the allegations, but conceded to a judgment enjoining him from future violations of the Exchange Act and ordering him to pay disgorgement of $576,033 and a financial penalty of $50,000.

On the other hand, the insider trading charge against Sanchez is still pending. The SEC’s decisions likewise remain subject to the approval of US District Judge Marvin Aspen in the Northern District of Illinois.


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