This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Insider Trading Could Plague Foreign Deals

NEW YORK ( TheStreet) -- Insider trading may be a new risk to international dealmakers seeking to buy U.S. companies, as regulators begin a review of what could be the largest-ever acquisition by a Chinese buyer of a U.S. firm.

In a Thursday complaint, the Securities and Exchange Commission brought forward allegations a Thai trader may have illegally profited from inside information about the recently announced proposed purchase of Smithfield Foods (SFD) by Shuanghui International Holdings.

The allegations come after a string of similar complaints involving acquisition efforts by emerging market firms for North America companies, and raise the prospect that insider trading concerns could put a damper on international mergers.

In the wake of Smithfield's announced acquisition by Shuanghui for $4.7 billion, most media reports are focusing on how the deal among pork industry heavyweights will test regulators' resolve to allow Chinese firms to invest in the United States. Senators, regulators and the Committee on Foreign Investment in the United States (CFIUS) will take a close look at whether Smithfield's acquisition raises national security concerns.

A bigger issue, however, may be the rash of insider trading allegations after the SEC said Thursday it froze the assets of a Thai trader who the regulator alleges made an illicit profit of $3 million on a tip about Smithfield's sale to Shuanghui.

Other large cross-border deals, notably Heinz's (HNZ) pending acquisition by Berkshire Hathaway (BRK.A) and 3G Capital of Brazil and CNOOC's (CEO) acquisition of Canadian oil and gas driller Nexen (NXY) have also been bogged down by insider trading inquires.

Allegations of impropriety tied to such high profile deals could cool U.S. firms' interest in selling to foreign buyers, given less strict regulation in emerging markets such as China and Brazil.

The allegations may also give U.S. regulators new reasons to be skeptical of foreign acquisitions of U.S. firms, beyond traditional CFIUS reviews.

To be clear, none of the companies involved in large recent deals are accused of any wrongdoing.

Instead the SEC allegations or inquiries target brokers, bankers and traders who may have benefitted from non-public inside information in trades prior to the announcement of each deal.

In Thursday's allegations, the SEC claims Badin Rungruangnavarat of Thailand purchased thousands of out-of-the-money Smithfield Foods call options and single-stock futures contracts from May 21 to May 28 in an Interactive Brokers account after receiving material, nonpublic information about the firm's potential acquisition.

The SEC's complaint states that one of Rungruangnavarat's sources of non-public material information was a Facebook friend who is an associate director at an investment bank a company that was exploring an acquisition of Smithfield.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
HNZ $72.49 0.00%
SFD $0.00 0.00%
BKW $35.50 0.00%
GS $166.18 0.00%
AAPL $93.64 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs