Asset Freezing: the long arm of the USA's SEC
The USA's Securities and Exchange Commission today announced that it has obtained asset freezing orders and other emergency relief against three Swiss-based entities it has charged with insider trading ahead of public announcement that Swiss-based Lonza Group Ltd would be acquiring Connecticut-based Arch Chemicals Inc.
The public announcement was made on 11 July 2011. The SEC acted with speed and obtained the orders in the U.S. District Court for the Southern District of New York on 18 July.
According to the SEC’s complaint filed on 15 July Compania International Financiera S.A., Coudree Capital Gestion S.A., and Chartwell Asset Management Services purchased more than a million common shares of Arch between 5 July and 8 July, mostly in accounts based in London, England. Immediately after the acquisition announcement on 11 July, the firms 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, the SEC requested emergency relief noting that because the defendants are foreign entities and 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.
The Honourable P. Kevin Castel, acting as emergency judge, granted the SEC’s requested relief late in the day on 15 July.
Among other things, 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.
The court has scheduled a preliminary injunction hearing in this matter for 25 July at 10 a.m. ET.
The case has been assigned to the Honourable Denise L. Cote.
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