AP SEC Probes SocGen Director's Sales Monday February 4, 2:03 pm ET By Marcy Gordon, AP Business Writer SEC Investigates Stock Sales by US Board Member of Societe Generale Before Loss Announcement WASHINGTON (AP) -- The Securities and Exchange Commission is examining stock sales by an American board member of Societe Generale, The Wall Street Journal reported Monday. The SEC inquiry is investigating stock sales investor Robert Day and two foundations linked to him made days before the French bank announced a $7 billion loss caused by a rogue trader. A spokesman for Day said he had promised to cooperate with any investigations. In a story on its Web site, The Journal cited unnamed people familiar with the matter. The Journal also said the U.S. attorney's office in Brooklyn, N.Y., had launched a criminal investigation related to Societe Generale, citing a person familiar with the matter, saying its precise focus wasn't immediately clear. Robert Nardoza, a spokesman for U.S. Attorney Benton J. Campbell, declined to comment. The French regulatory agency said last week it opened an investigation into Societe Generale. According to filings last week in France, Day and the charitable foundations sold shares in Societe Generale on Jan. 9, Jan. 10 and Jan. 18. The bank says it launched an internal investigation on Jan. 18, after transactions by trader Jerome Kerviel raised red flags. The stock sales by Day and the foundations totaled $206 million. Day retains a large stake in Societe Generale, according to The Journal report. The bank made its bombshell-loss announcement on Jan. 24. Day is an investment manager with Los Angeles-based Trust Co. of the West. The French regulators made no allegation of wrongdoing, but an attorney for some Societe Generale shareholders called for an investigation of illegal insider trading. SEC spokesman John Nester declined to comment. Societe Generale also declined comment on the Journal report. Last week, the bank said in a statement that Day sold the shares during a limited window of time in which board members are authorized to sell stock. "No inside information was used in any way," the bank's statement said. "Mr. Day, like the other board members, was not advised of Mr. Kerviel's trading losses." The spokesman for Day, Josh Pekarsky, said in an e-mailed statement: "Mr. Day and his family's trusts and charitable foundations sold Societe Generale shares in December and January, which was a window of time where such trades were permitted under Societe Generale's trading policies. All required government disclosures were made. No inside information was used in any way with respect to these sales. Mr. Day has pledged his cooperation into any inquiries of this matter." http://biz.yahoo.com/ap/080204/societe_generale_us_probe.html
Now they are REALLY into hot water. SocGen directors may get along unharmed by corrupt France officials, but not by the SEC. The timing wont help them much, they dumped their shares just days before the rogue trader news were made public.
Agreed. Those U.S. board members whjo sold stock before the announcement of the $7 billion loss will be prosecuted to the fullest extent of the law under the SEC.
Is there actually any evidence they were insider trading? All the article mentions is the coincidental timing. If the board members really did know about it, selling Soc Gen stock would have been the worst way to play it. They could have just waited until they knew the losing 50 billion position was going to be unwound, and then bought lots of Dax puts. That way they'd commit no crime and would make much more money with less investment of capital.
I think buying puts is the same situation as selling $206 million worth of stock. It's INSIDER TRADING no matter how you slice the pie.
That wouldn't have been insider trading, and would have been legal, however, without evidence that the liquidation was the key order driving the price down, there is only a small edge in buying puts on the index at that time for the SocGen folk. They didn't want a small edge. They wanted to preserve that capital. Their greed should get them in jail.
Buying options is considered insider trading. There was a case last year when a Canadian gold company got bought out and calls were bought before the announcement, I don't know the full details but I'm sure Google will bring something up.