This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Insider Trading Could Plague Foreign Deals

The insider trading allegation connected to the Smithfield is similar an investigation made by the SEC related to Heinz's takeover.

The SEC alleged in that merger a dormant trading account in Switzerland bought call options for Heinz just ahead of the ketchup maker's purchase by Berkshire and 3G Capital, in what the regulator said was a violation of securities laws.

The SEC alleges that on Feb. 13, a day prior to the announcement of Heinz's acquisition, the Swiss options account bought 2,533 out-of-the money June $65 calls for a total of nearly $90,000. "Between Sept. 1, 2012, and Feb. 13, 2013, the account through which the defendants traded had no prior history of trading in Heinz," the SEC states.

When Heinz's $72.50-a-share acquisition was announced, those trades stood to gain nearly $1.8 million, a 1,700% return from the prior day when the contracts were traded. The alleged insider trading traced back to an account at Goldman Sachs, however, it's owners didn't appear at a U.S. court hearing freezing the account's assets and a criminal inquiry is ongoing.

In November, Brazilian ex-banker Igor Cornelsen and his firm Bainbridge Group agreed to pay $5.1 million to settle SEC allegations that he made illegal trades ahead of 3G's 2010 acquisition of Burger King Holdings after receiving an insider tip from a Wells Fargo broker in Miami.

The SEC is also investigating Hong Kong billionaire Zhang Zhirong's millions in options trading profits on CNOOC's acquisition of Nexen for $15.1 billion, according to a July 2012 complaint brought forward by the regulator. According to the complaint, the SEC's investigation continues, however it has frozen the account's assets.

The string of insider trading allegations and inquiries in some of the most notable recent cross-border merger efforts in North America indicate risks beyond simple national security issues.

While the Smithfield Foods acquisition may be a bit of a lightning rod for fears about foreign ownership of U.S. firms, the insider trading allegations that have come with the acquisition may raise new concerns for investors, regulators and C-Suites.

-- Written by Antoine Gara in New York

2 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
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BKW $35.50 0.00%
HNZ $72.49 0.00%
SFD $0.00 0.00%
GS $187.24 0.00%
AAPL $124.24 0.00%

Markets

DOW 17,678.23 -40.31 -0.23%
S&P 500 2,056.15 -4.90 -0.24%
NASDAQ 4,863.3620 -13.1570 -0.27%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs