SEC Obtains Asset Freezes Against Swiss Entities Accused of Insider Trading

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Yoomi Lee | Bloomberg Law SEC v. Compania Internacional Financiera S.A., No. 11-CV-04904 (S.D.N.Y. filed July 15, 2011); SEC Press Release No. PR-2011-149 (July 18, 2011) The Securities and Exchange Commission (SEC) obtained asset freezes and other emergency relief against three Swiss-based investment entities, Compania Internacional Financiera S.A., Coudree Capital Gestion S.A., and Chartwell Asset Management Services (collectively, Defendants), for allegedly purchasing Arch Chemicals, Inc. (Arch) securities while in possession of material, non-public information about a proposed acquisition of Arch. As such, the SEC alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC also seeks injunctive relief against Defendants, disgorgement, and payment of civil monetary penalties.

Emergency Relief

The SEC requested emergency relief maintaining that Defendants are foreign entities that used foreign accounts to place trades, and thus, there was a "substantial risk" that proceeds from the sale of Arch securities may be transferred beyond the jurisdiction of U.S. courts. Robert Khuzami, Director of the SEC's Division of Enforcement, stated that the SEC's quick action to obtain an asset freeze order only four days after the "observation of suspicious trading" prevented millions of dollars from being transferred overseas.

Insider Trading

The SEC alleged that Defendants purchased a large amount of Arch securities, whose common stock trades on the New York Stock Exchange, in the days leading up to a July 11, 2011 acquisition announcement by Lonza Group Ltd (Lonza). Under the acquisition agreement, Lonza acquired all of Arch's outstanding common stock at $47.20 a share. Defendants allegedly purchased Arch securities between July 5, 2011 and July 8, 2011, before the share price increased 21 percent. According to the SEC, Arch's common stock price rose an additional 12 percent to $47.37 on the day of the announcement of the acquisition. Further, Defendants purportedly began to sell Arch securities immediately after the announcement of the acquisition, making millions of dollars in profits. The SEC claims that there was no public information regarding the proposed acquisition or any other significant news about Arch available to the public. Disclaimer This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy. ©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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