Santander Analyst Accused of Insider Trading in Potash Takeover Bid

(Bloomberg) -- A Banco Santander SA analyst and an accomplice illegally reaped almost $1.1 million with insider trades before BHP Billiton Ltd.’s $39 billion takeover bid for Potash Corp. of Saskatchewan Inc., U.S. regulators said.

Juan Jose Fernandez Garcia, 35, and Luis Martin Caro Sanchez, 36, used accounts at the same U.S. brokerage to buy more than $61,000 in Potash stock options days before BHP’s offer became public Aug. 17, the Securities and Exchange Commission said in documents filed Aug. 20 in federal court in Illinois. Fernandez Garcia heads the bank’s European equity derivatives research, according to the agency’s complaint.

The men “tried to move offshore highly suspicious trading profits made just a few days before,” said Daniel Hawke, who leads a group at the SEC that polices market abuse, in a statement yesterday. “We will act swiftly and decisively to deny wrongdoers the profits of their illegal activity.”

Santander provisionally suspended Fernandez Garcia while inquiries continue, the bank said in a statement sent by e-mail.

“The bank has acted at all times following the appropriate procedures,” Santander said. “We are awaiting the results of both our internal and the supervisors’ investigations, with whom the bank will cooperate.”

The SEC said it doesn’t know of lawyers representing the defendants. An e-mail to Fernandez Garcia was answered with an automated reply saying he will be out of office until Sept. 9. A phone number for Caro Sanchez couldn’t immediately be found.

BHP Advisers

Santander is one of five banks advising BHP on its bid for Potash Corp., along with JPMorgan Securities Inc., TD Securities Inc., Barclays Capital, BNP Paribas SA and Royal Bank of Scotland Group Plc.

The insider trading case is a matter for Santander, not BHP, Marius Kloppers, chief executive officer of the world’s biggest mining company, told reporters in London today.

“Clearly it is an issue where more press about something is not useful in a bid” situation like this, Kloppers said. “I would preferred not to have had the press.”

Potash shares jumped 28 percent on the day the Saskatoon, Saskatchewan-based company said it had rejected a takeover offer from BHP, the world’s largest mining company. Melbourne-based BHP took its $130-a-share cash bid directly to Potash investors.

SEC Complaint

In its complaint, the SEC asserted that the two defendants had “material, nonpublic information” about BHP’s proposal, without specifying how they obtained it. A judge temporarily froze their accounts, according to the agency’s statement.

From Aug. 12 to Aug. 16, Fernandez Garcia purchased a total of 282 call options for about $13,700, the SEC said in the complaint. He sold them on Aug. 17 for a profit of about $576,000. Caro Sanchez bought $48,000 of call options, making a profit of $497,000, according to the complaint.

“Global corporate clients would expect compliance structures to be in place to prevent this sort of thing,” said Peter Hahn, who lectures on corporate finance at the Cass Business School in London. “Santander has been a bank that has been widely admired for its focus on retail-led commercial lending.”

Santander, which relies on retail banking business from Spain to Brazil and the U.K. for more than 70 percent of profit, has been building up its wholesale banking business.

Adolfo Lagos, head of Santander’s global banking and markets unit, said in a December interview he planned to hire 200 bankers after taking business from rivals hurt by the financial crisis. Santander ranks 14th among top the global financial advisers this year with $83.6 billion of business volume, according to data compiled by Bloomberg.

Juan Jose Fernandez Garcia's profile on linkedin
http://es.linkedin.com/pub/juan-jose-fernandez-garcia/7/2a/a20

Equity Derivatives Research at Santander Bank

Current
Equity Derivatives Research at Santander Bank (Treasury)

Past

• Equity Derivatives and Delta 1 research at Santander Investment
• Quant Strategist Analyst at grupo ahorro corporacion
• Quantitative Derivatives Analyst (Equity, Fixed Income, Money Markets) at Grupo Ahorro Corporacion

Education

• Universidad Carlos III de Madrid
• Universidad Rey Juan Carlos
• CFA Institute

Juan Jose Fernandez Garcia’s Summary

Head of European Equity Derivatives Research at Banco Santander.

Publication of ED research based on IBEX 35 and Euro Stoxx 50 stocks; conducting ongoing & innovative research of options & volatility related themes; Reports published and available upon request.

Some examples of my research are published at: http://www.cboe.com/Institutional/reports.aspx

Regularly interacting with clients for supporting the marketing activities and work with traders & sales specialists for the marketing activities of the firm with regards to the research published;