for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up
Funds News

Regulators reviewing pre-M&A trades: report

Traders work on the floor of the New York Stock Exchange in New York, January 9, 2008. REUTERS/Lucas Jackson

NEW YORK (Reuters) - Securities regulators are reviewing whether investment banks’ trades in shares of companies linked to M&A deals they were advising were based on coincidence or inside information, according to The Wall Street Journal on Monday.

Investment banks must keep their trading and merger advisory businesses separate, although one arm of a bank could buy shares in a company without knowing that another arm is advising on a deal involving that firm.

The report quoted Stephen Luparello, a top official at the Financial Industry Regulatory Authority (FINRA), as saying the issue was “definitely on our radar screen”. FINRA is the largest non-governmental regulator of the U.S. securities industry.

Its interest stemmed from an academic study which found such trading happens more often than would be expected by chance, the report said.

The Wall Street Journal said it had reviewed stock ownership and deal records and found dozens of cases in which investment banks appeared to buy shares in companies that were targets of acquisitions by firms they were advising.

Such transactions involved most of the major investment banks including Citigroup Inc C.N, Credit Suisse Group CSGN.VX, Goldman Sachs Group Inc GS.N, Merrill Lynch & Co. MER.N and Morgan Stanley MS.N, the report said.

Credit Suisse declined to comment, while representatives of the other banks were not immediately available for comment.

Reporting by Ritsuko Ando; Editing by David Holmes

for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up