WASHINGTON - A Banco Santander SA analyst and an accomplice illegally reaped almost $1.1 million with insider trades before BHP Billiton Ltd.’s $39 billion takeover bid for Potash Corp. of Saskatchewan Inc., U.S. regulators said.
Juan Jose Fernandez Garcia, 35, and Luis Martin Caro Sanchez, 36, used accounts at the same U.S. brokerage to buy more than $61,000 in Potash stock options days before BHP’s offer became public Aug. 17, the Securities and Exchange Commission said in documents filed Aug. 20 in federal court in Illinois. Fernandez Garcia heads the bank’s European equity derivatives research, according to the agency’s complaint.
The men “tried to move offshore highly suspicious trading profits made just a few days before,” said Daniel Hawke, who leads a group at the SEC that polices market abuse, in a statement Tuesday. “We will act swiftly and decisively to deny wrongdoers the profits of their illegal activity.”
A Santander spokeswoman, who asked not to be identified by name in line with company policy, said in a phone interview today the bank had no comment on the case.
The SEC said it doesn’t know of lawyers representing the defendants. An e-mail to Fernandez Garcia was answered with an automated reply saying he will be out of office until Sept. 9. A phone number for Caro Sanchez could not immediately be found.
Santander is one of five banks advising BHP on its bid for Potash Corp., along with JPMorgan Securities Inc., TD Securities Inc., Barclays Capital, BNP Paribas SA and Royal Bank of Scotland Group Plc.
The insider trading case is a matter for Santander, not BHP, Marius Kloppers, CEO of the world’s biggest mining company, told reporters in London Wednesday.
“Clearly it is an issue where more press about something is not useful in a bid” situation like this, Kloppers said. “I would preferred not to have had the press.”
Potash shares jumped 28 percent on the day the Saskatoon, Saskatchewan-based company said it had rejected a takeover offer from BHP, the world’s largest mining company. Melbourne-based BHP took its $130-a-share cash bid directly to Potash investors.
In its complaint, the SEC asserted that the two defendants had “material, nonpublic information” about BHP’s proposal, without specifying how they obtained it. A judge temporarily froze their accounts, according to the agency’s statement.
From Aug. 12 to Aug. 16, Fernandez Garcia purchased a total of 282 call options for about $13,700, the SEC said in the complaint. He sold them on Aug. 17 for a profit of about $576,000. Caro Sanchez bought $48,000 of call options, making a profit of $497,000, according to the complaint.
“Global corporate clients would expect compliance structures to be in place to prevent this sort of thing,” said Peter Hahn, who lectures on corporate finance at the Cass Business School in London. “Santander has been a bank that has been widely admired for its focus on retail-led commercial lending.”
Santander, which relies on retail banking business from Spain to Brazil and the United Kingdom for more than 70 percent of profit, has been building up its wholesale banking business.
Adolfo Lagos, head of Santander’s global banking and markets unit, said in a December interview he planned to hire 200 bankers after taking business from rivals hurt by the financial crisis. Santander ranks 14th among top the global financial advisers this year with $83.6 billion of business volume, according to data compiled by Bloomberg.