Wednesday, July 19, 2006

SEC gets asset freeze in Petco insider trading case

WASHINGTON, July 19 (Reuters) - The U.S. Securities and Exchange Commission said on Wednesday it obtained a court order freezing the assets of certain unknown purchasers who bought call options of Petco Animal Supplies Inc. (PETC.O: Quote, Profile, Research) stock ahead of news that the company would be acquired for $1.8 billion.
The SEC said one or more purchasers engaged in illegal insider trading by buying more than 1,400 call option contracts for Petco in late June and early July 2006.
On July 14, the company announced that it had agreed to be acquired by a company owned by two private equity funds for $29 per share in cash, a 49-percent premium above the price Petco stock closed the previous day.
The options were "out of the money," indicating the investors believed the stock price would rise substantially, and were set to expire within weeks of the purchase date, the SEC said.
The commission said the unknown purchasers received illicit profit of about $862,000 through Swiss and English accounts.
The SEC said it is seeking permanent injunctions, disgorgement of ill-gotten gains and civil penalties.

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