SEC announced penalties in Heinz insider trading investigation

SEC announced penalties in Heinz insider trading investigation

Two Brazilian brothers have agreed to pay almost US$5m to settle allegations that they were responsible for "suspicious trading in call options" for HJ Heinz the day before the announced acquisition of the firm private equity investors.

In February this year, Heinz was acquired by Warren Buffett's Berkshire Hathaway fund and private equity firm 3G Capital in a deal worth US$28bn.

The US Securities and Exchange Commission accused Michel and Rodrigo Terpins of purchasing shares through a Cayman Islands-based entity named Alpine Swift on the basis on material non-public information.

The brothers purchased almost $90,000 in option positions in Heinz the day before the acquisition proposals were announced. Those portions increased by nearly 2000% the next day, SEC said.

"Rodrigo and Michel Terpins obtained confidential information prior to any public awareness that a Heinz deal was in the works and they exploited it to the disadvantage of all other traders in the marketplace," said Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York regional office.

"Those who use foreign accounts to commit insider trading in the US markets should know that their activities can still be tracked and they will be held accountable by the SEC for their actions."

In a litigation release yesterday (10 October), SEC said the Terpins brothers and Alpine Swift have agreed to disgorge the entire $1.8m in "illegal profits" and the Terpins brothers will pay a further $3m in penalties.

The settlement is subject to court approval.

Terpins consented to the terms of the deal without admitting or denying the allegations.