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SEC Amends Petco Insider Trading Complaint

The Securities and Exchange Commission amended a complaint charging a British options trader with insider trading of options and profiting to the tune of $3 million on the sale of Petco Animal Supplies last year, the SEC said Aug. 3.

The complaint said Taher Suterwalla, 30, entered into the transactions while aware of material nonpublic information about the pending acquisition of Petco by two private equity firms in July 2006.

Petco announced the sale of the company July 13 for $1.8 billion to Leonard Green & Partners LP and Texas Pacific Group.

An initial complaint filed by the SEC soon after the sale was announced said at least two people engaged in the insider trading in advance of the deal, and profited from the transactions by more than $10 million.

The amended complaint said that in the three weeks before the sale announcement, Suterwalla purchased Petco call options from a Swiss financial institution, which filled his orders by purchasing the call options in this country. The call options were “out of the money” representing a bet that the price of Petco’s stock would rise substantially, and were set to expire within weeks of the purchase date, according to the complaint.

Suterwalla also purchased derivative instruments known as spread bets from brokerage houses in the United Kingdom, the complaint states.

Last year, the SEC obtained a temporary restraining order freezing the assets of Suterwalla and other unnamed purchasers of the call options, prohibiting the purchasers from obtaining proceeds from the sale of the options.

The SEC said it is seeking a permanent injunction, disgorgement of ill-gotten gains with prejudgment interest, and imposition of civil penalties.

, Mike Allen

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