The U.S. Securities and Exchange Commission has charged a London, England resident with insider trading ahead of the July 14, 2006, announcement that San Diego-based Petco Animal Supplies, Inc. would be purchased by two private equity firms.

The commission filed an amended complaint in federal court in San Diego charging Taher Suterwalla, 30, with insider trading in the securities of Petco. The amended complaint identifies Suterwalla as the “one or more unknown purchasers” of Petco described in the commission’s initial complaint that was filed just three days after the Petco acquisition announcement. The proceeds from the trading have been frozen ever since as a result of a court order granted in response to the commission’s emergency request.

The amended complaint alleges that in the three weeks preceding Petco’s acquisition announcement, Suterwalla purchased Petco call options from a Swiss financial institution, which filled his orders by purchasing Petco call options in the US. The options generally were out of the money, representing a bet that the price of Petco stock would rise substantially, and were set to expire within weeks of the purchase date, representing a bet that the price rise would happen soon. The amended complaint further alleges that Suterwalla purchased from brokerage houses in the UK certain derivative instruments known as spread bets, which caused the brokers to purchase Petco common stock and options in the US.

The amended complaint alleges that Suterwalla entered into the transactions while aware of material nonpublic information regarding the pending acquisition of Petco, and that he took highly leveraged and speculative positions in the price of Petco’s securities, which exposed him to the potential for millions of dollars in losses if Petco’s price declined. It further alleges that Suterwalla made all of his purchases within 17 days of Petco’s acquisition announcement, that he made a number of his purchases the day before the announcement, and that his illicit profit from these transactions was more than US$3 million.

These allegations have not been proven.

“Insider trading ahead of mergers and acquisitions is one of the commission’s top priorities,” said Linda Thomsen, director of the commission’s Division of Enforcement. “We will aggressively pursue people who commit such violations. The geographical distance between perpetrators and the markets they defraud will not preclude us from taking action.”

The commission is seeking a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest thereon, and the imposition of civil penalties.

The SEC acknowledged the Chicago Board Options Exchange, the UK’s Financial Services Authority, the Swiss Federal Banking Commission, and the Ontario Securities Commission for their continuing assistance in this matter.