SEC Begins Probe of Trades in Placer Dome Options (Update1)
quote.bloomberg.com
Nov. 2 (Bloomberg) -- The Securities and Exchange Commission is investigating whether insiders had confidential information when they bought Placer Dome Inc. securities days before Barrick Gold Corp. made an unsolicited $9.2 billion bid for the company.
The SEC sued today in New York federal court, asking a judge to bar unknown defendants from selling $1.9 million worth of Placer Dome call options they bought last week. A call option gives the holder the right to buy shares of a stock at a specific price within a given time.
Shares in Vancouver-based Placer Dome jumped more than 20 percent after Toronto-based Barrick Gold, the world's third- biggest gold producer, made an unsolicited $9.2 billion bid on Oct. 31. The SEC said defendants who bought the options on Oct. 25 and 26 may have had secret information about the bid.
``This is an insider trading case involving highly profitable and highly suspicious purchases of call option contracts,' the SEC said in its suit.
``We were just made aware of the suit and will obviously cooperate with the SEC as they go forward in their investigation,' said Barrick Gold spokesman Vincent Borg. Placer Dome spokeswoman Gayle Stewart didn't have an immediate comment.
According to the SEC, the purchasers of the options traded through accounts held in the name of Banque SCS Alliance, a Geneva-based asset manager.
`Unlawful Trading'
The accounts were maintained by Fimat Banque Frankfurt, the SEC said. Fimat Frankfurt placed the orders through its U.S. affiliate, Fimat USA, which in turn executed the purchases through the Chicago Board Options Exchange, the suit says.
``The trades in the account were made by people acting in concert or pursuant to a common direction,' the SEC said in its suit. ``At present, we do not know the names of the individuals with trading authority who directed the unlawful trading.'
The complaint seeks civil penalties and an order barring the defendants from violating U.S. fraud laws.
As part of the transaction, Toronto-based Goldcorp Inc. agreed to buy some of Placer's assets for $1.35 billion in cash. Mining companies have been buying rivals as gold prices have climbed to a 17-year high and output in some areas has dwindled.
The acquisition would make Barrick the world's largest gold producer. Placer Dome is the world's fifth-biggest gold producer by 2004 output.
Before this week, shares of Placer Dome had fallen 24 percent in the past year, compared with a 5 percent gain in the Philadelphia Stock Exchange Gold & Silver Index. Shares today rose 56 cents to C$23.27 in Toronto Stock Exchange trading.
The case is SEC v. Unknown Purchasers, 05-CV-9300, U.S. District Court, Southern District of New York.
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