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NEW YORK The U.S. Securities and Exchange Commission has charged a former Banco Santander SA executive and a former Spanish judge with insider trading over a proposed takeover of Potash Corp of Saskatchewan Inc on which the Spanish bank had given investment banking advice.
In a lawsuit filed on Tuesday in U.S. District Court in New York, the SEC is seeking to recover nearly $1 million of alleged illegal profit by Cedric Cañas Maillard, a former adviser to Banco Santander's chief executive, and Julio Marín Ugedo, the former judge.
According to the SEC, Cañas, 40, had learned on August 5, 2010, that Santander was helping Anglo-Australian mining giant BHP Billiton Ltd prepare a bid for Potash, a fertilizer company based in Saskatoon, Saskatchewan.
The SEC said that Cañas, a Harvard Business School graduate, then tipped the acquisition to Marín, 42, a close friend with whom he had grown up and still talked to by phone, text message or email dozens of times a month.
According to the SEC, Cañas soon bought the equivalent of 30,000 Potash shares through contracts-for-difference (CFD), which are leveraged securities not traded in the United States, and Marín bought 1,393 Potash shares. It said Marín has admitted to discussing Potash with Cañas before making that purchase.
On August 17, 2010, Potash rejected an unsolicited $38.6 billion takeover from BHP Billiton, but the news caused Potash's share price to shoot up more than 25 percent that day.
The SEC said Cañas and Marín quickly sold their securities, realizing respective net profits of $917,239 and $43,566. It seeks to recover those sums and impose civil fines.
"Cañas used his position as an insider at an investment bank to trade CFDs based on confidential information," Daniel Hawke, chief of the SEC's market abuse unit, said. "To those who think they can mask their insider trading by trading CFDs rather than the underlying equity security, this case demonstrates our resolve to detect such trading and hold them accountable."
The SEC said Cañas left his job at Santander in 2011 and now lives in Madrid, while Marín lives in Badajoz, Spain.
It is unclear whether the defendants have hired lawyers. Neither could immediately be reached for comment. Santander spokeswoman Julia Hayley declined to comment.
In April 2011, the SEC said former Santander analyst Juan Jose Fernandez Garcia agreed to pay more than $626,000 in disgorged profit and fines to settle insider trading charges relating to Potash. He did not admit or deny wrongdoing.
Canada ultimately blocked the Potash takeover on the ground that it did not provide a "net benefit" to the country.
The case is SEC v. Cañas Maillard et al, U.S. District Court, Southern District of New York, No. 13-05299.
(Reporting by Jonathan Stempel; Editing by Bernard Orr)