Two residents of Spain were charged with insider trading ahead of BHP Billiton Plc's recent announcement that it would make a multi-billion dollar cash tender offer to acquire Potash Corp. of Saskatchewan.  The SEC charged the individuals and obtained an emergency court order to freeze their assets, which included nearly $1.1mn in illegal profits.

The SEC alleges that Juan Jose Fernandez Garcia - head of a research arm of Banco Santander, S.A. - and Luis Martin Caro Sanchez purchased hundreds of "out-of-the-money" call option contracts for stock in Potash in the days leading up to the public announcement of BHP's bid on 8/17.  The purchases were made on the basis of material, non-public information about the impending tender offer. Banco Santander, S.A. had been advising BHP on its bid.

    In Possession of Information About the Tender Offer.  BHP made an unsolicited $38.6bn offer to purchase all of the stock of Potash for $130 per share in cash - a 16% premium above Potash's closing price of 8/16.  Potash, based in Saskatoon, Canada, is the world's largest producer of fertilizer minerals and its stock trades on the NYSE.  BHP, based in Melbourne, Australia, is the world's largest mining company.

Garcia and Sanchez jointly spent a little more than $61,000 to purchase the contracts in U.S. brokerage accounts.  Garcia allegedly possessed material, nonpublic information about the offer while he purchased approximately 282 call option contracts for Potash stock from 8/12-16.  Most of the contracts were set to expire on 8/21, and all but 6 of the call option contracts were out-of-the-money.  Immediately after BHP's offer was announced, all the options were sold for illicit profits of nearly $1.1mn.

Sanchez, also possessed the material, nonpublic information;  he purchased approximately 331 out-of-the-money call option contracts for Potash stock on 8/12 and 8/13, transacting in an account at Interactive Brokers LLC — the same U.S. brokerage firm through which Garcia traded his Potash call option contracts.  Sanchez's contracts were set to expire within weeks of the purchase date.  Neither individual had previously traded this year in Potash securities through his account at Interactive Brokers.

    Emergency court Order.   The emergency court order obtained late Friday by the SEC on an ex parte basis and unsealed by the court today freezes approximately $1.1mn in assets and, among other things, grants expedited discovery and prohibits Garcia and Sanchez from destroying evidence.  The SEC's Market Abuse Unit headed by chief Daniel M. Hawke and deputy chief Sanjay Wadhwa conducted the expedited investigation in this matter jointly with the agency's Chicago Regional Office.  The SEC's investigation continues.  [SEC PR 10-153, 8/24]