The U.S. Securities and Exchange Commission has charged two Spaniards with illegal insider trading ahead of BHP Billiton Plc’s offer to acquire Potash Corp. of Saskatchewan Inc.

The SEC alleges that Juan Jose Fernandez Garcia, who is the head of a research arm at Banco Santander, S.A. (a Spanish banking group advising BHP on its bid) and Luis Martin Caro Sanchez purchased hundreds of “out-of-the-money” call option contracts for stock in Potash in the days leading up to the public announcement of BHP’s bid on August 17. It claims they made the purchases on the basis of material, non-public information about the impending tender offer. The allegations have not been proven.

The SEC said that Garcia and Sanchez jointly spent a little more than US$61,000 to purchase the contracts in U.S. brokerage accounts. And, immediately after BHP’s offer was announced, they sold all of their options for profits of nearly US$1.1 million.

The commission obtained an emergency court order to freeze their assets. “Garcia and Sanchez tried to move off-shore highly suspicious trading profits made just a few days before. When abusive market practices occur, as in the case against Garcia and Sanchez, we will act swiftly and decisively to deny wrongdoers the profits of their illegal activity,” said Daniel Hawke, chief of the SEC enforcement division’s market abuse unit.

In addition to the emergency relief, the Commission is seeking permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.

IE