insider trading

Case Study On February 8, 2008, a Credit Suisse banker was found guilty of 28 counts of insider trading related to a TXU buyout and other major deals. The prior year the Securities and Exchange Commission had filed a complaint with the U.S. District Court in Chicago alleging that unknown buyers purchased 8,000 call option contracts (rights to buy stock at a fixed price) for TXU common stock in advance of a buyout announcement. TXU, a giant Texas utility, had received the buyout offer from a consortium of private equity firms. According to the SEC complaint, the call options had been purchased through foreign accounts, although the trades were cleared through domestic brokerage firms with purchase orders on the Chicago Board Options Exchange. The SEC claimed the trades were made on the basis of buyers being in possession of material, nonpublic information ahead of the announcement. The firm's common stock price had surged during the two trading days prior to the announcement of the buyout.