10/14 Update:  We update this blog with a question:  Can/Should firms be required to report large (and unusual) options transactions in retail investor accounts and in certain business accounts? 

We ask, because, in this case, an individual transacted through his investment vehicle to buy 2,400 options costing $300K, and later ti buy 550 out-of-the-money calls that were set to expire. 

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Italian trader, Gianluca Di Nardo, agreed to pay $3 million in disgorgement and fines to settle SEC charges that he traded in securities of 2 issuers using insider information.   The SEC had alleged that Di Nardo, trading through his investment vehicle, Corralero Holdings, Inc., made highly profitable and suspicious purchases of call options ahead of public announcements that the companies had been acquired. 

    Alleged Fact Pattern.   Between 9/21 and 9/22 of 2006, Di Nardo bought 2,400 APCC call options at a cost of nearly $300,000, and liquidated all APCC call options at a profit of about $1.4 million.  Schneider Electric SA announced on 10/30, that it would acquire all of APCC’s outstanding shares. On 4/29/08, Di Nardo bought 550 DRS call options - out-of-the-money and set to expire - and liquidated all DRS call options at a profit of $670,000.  The WSJournal ran an article on 5/8, about advanced merger negotiations between Finmeccanica S.p.A. and DRS. 

Others were named as alleged purchasers of DRS call options in advance of the announcements:  Oscar Ronzoni, an Italian citizen;  Paolo Busardò, an Italian citizen;   Tatus Corp., a Panamanian corporation, an investment vehicle based in Switzerland for which Busardò is the ultimate beneficial owner and Ronzoni is the formal managing director; and A-Round Investment SA, a consulting firm based in Lugano controlled by Busardò.  

Previously in this action, in July 2008, the Court approved an SEC request by ordering a temporary restraining order that froze the assets of the then-unknown purchasers of DRS and APCC call options.  On 8/18/08, the asset freeze was extended.  The SEC credits the assistance of the U.S. DoJ, the Options Regulatory Surveillance Authority, the Swiss Financial Market Supervisory Authority, and the Swiss Federal Office of Justice in this matter.   [Litigation Rel. 21687A,  10/7]