The US SEC (Securities and Exchange Commission) has charged two Spanish executives of Banco Santander, with insider trading and obtained an emergency court order to freeze their assets after they made nearly $1.1m in illegal profits by trading in advance of last week's public announcement of a multi-billion dollar cash tender offer by the world's biggest mining giant BHP Billiton Plc to acquire  Canada's Potash Corp. of Saskatchewan - - the world's largest fertilizer enterprise.

The SEC alleges that Juan Garcia and Luis Martin Caro Sanchez purchased - -  on the basis of material, non-public information about the impending tender offer - - 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 August 17th. Garcia is the head of a research arm at Banco Santander - - the Spanish banking group advising BHP on its bid. Garcia and Sanchez jointly spent a little more than $61,000 to purchase the contracts in US brokerage accounts. Immediately after BHP's offer was announced publicly on August 17th, Garcia and Sanchez sold all of their options for illicit profits of nearly $1.1 million.

"Garcia and Sanchez tried to move off-shore highly suspicious trading profits made just a few days before. When abusive market practices occur, as in the case against Garcia and Sanchez, we will act swiftly and decisively to deny wrongdoers the profits of their illegal activity," said Daniel M. Hawke, Chief of the Enforcement Division's Market Abuse Unit.

According to the SEC's complaint filed Friday in US District Court for the Northern District of Illinois and unsealed by the court on Tuesday, BHP made an unsolicited $38.6bn offer to purchase all of the stock of Potash for $130 per share in cash. The acquisition share price represented a 16% premium above Potash's closing price of $112.15 on August 16th. Potash, based in Saskatoon, Canada, is the world's largest producer of fertilizer minerals and its stock trades on the New York Stock Exchange. BHP, based in Melbourne, Australia, is the world's largest mining company.

The SEC alleges that Garcia was in possession of material, nonpublic information regarding BHP's offer to acquire Potash while he purchased approximately 282 call option contracts for Potash stock from August 12 to 16. The majority of the contracts were set to expire on August 21st, and all but six of the call option contracts purchased by Garcia were out-of-the-money. Sanchez, while in possession of material, nonpublic information regarding BHP's offer to acquire Potash, purchased approximately 331 out-of-the-money call option contracts for Potash stock on August 12th and 13th. He purchased the contracts in an account at Interactive Brokers LLC - -  the same US 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.

The emergency court order obtained late Friday by the SEC on an ex parte basis and unsealed by the court Tuesday freezes approximately $1.1m in assets and, among other things, grants expedited discovery and prohibits Garcia and Sanchez from destroying evidence.

SEC Complaint