SEC Alleges Insider Trading in Arch Chemicals Before Merger Announcement

The U.S. Securities and Exchange Commission sued three firms, two of them allegedly controlled by Yomi Rodrig, a Turkish trader living in Geneva, claiming they profited from insider trading in Arch Chemicals Inc. (ARJ) shares.

The SEC, in a lawsuit filed July 15 in Manhattan federal court, said Compania Internacional Financiera SA and two other firms made millions of dollars by buying Arch shares in the days before a July 11 announcement that Basel, Switzerland-based Lonza Group Ltd. planned to buy the specialty chemicals maker for $1.2 billion.

Arch rose 21 percent in the week before Lonza said it would buy all of the Norwalk, Connecticut-based company’s outstanding shares for $47.20 each. Arch jumped an additional 12 percent the day of the announcement to close at $47.37.

In addition to Compania Internacional Financiera, the SEC sued Coudree Capital Gestion SA, a Geneva-based company also allegedly controlled by Rodrig, according to the complaint. A third defendant, Chartwell Asset Management Services, is described in the complaint as an investment adviser based in Geneva.

In 2005, Rodrig agreed to forfeit more than $4.8 million in trading profits and pay a penalty of $1.4 million to resolve an SEC claim that he violated short-selling rules. Rodrig settled without admitting or denying the SEC’s allegations.

“As I read the complaint, it simply says the trades were suspicious,” Ira Sorkin, a lawyer for Rodrig, said today in a telephone interview. “That’s not the standard for trading on inside information.”

The case is SEC v. Compania Internacional Financiera SA, 11-CV-4904, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in U.S. District Court in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.