(October 16 – 17:25 ET) – The Securities and Exchange Commission is accusing a former Salomon Smith Barney analyst of insider trading.

The SEC has filed a civil complaint in the U.S. District Court for the Southern District of New York alleging that Michael Petrescu-Comnene, an analyst in the investment banking division of Salomon, engaged in repeated acts of insider trading over a nine-month period. It alleges that Petrescu-Comnene illegally tipped at least two of his friends about eight potential merger and acquisition transactions that he learned about while working at Salomon. These transactions include the acquisition of Associates First Capital Corp. this September by Citigroup Inc., Salomon’s parent.

The commission specifically alleges that Petrescu-Comnene, who started working at Salomon in July 1999, began to tip his friends in December 1999. That month, he tipped at least one of his friends prior to the December 20 announcement that MMI Companies Inc., a Salomon client, would be acquired by The St. Paul Companies. The friend who received the tip purchased 1,500 shares of MMI stock on December 17, one business day prior to the announcement, and quickly flipped it for a profit of US$7,125.

The SEC also alleges that friends of Petrescu-Comnene agreed to make trades in their own accounts and share the profits with him. The SEC says the group made their largest profits by purchasing AFS call options the day before the September 6 announcement that Citigroup had agreed to purchase AFS in an all-stock deal valued at US$31.1 billion. The deal resulted in a 38% runup in AFS stock, creating a profit of US$40,875.

The SEC alleges that Petrescu-Comnene violated his fiduciary obligations to Salomon and its clients. It seeks a permanent injunction against future violations of the federal securities laws, disgorgement of profits and prejudgment interest, plus a civil monetary penalty. The U.S. Attorney for the Southern District of New York arrested Petrescu-Comnene on October 13 and filed a criminal complaint charging him with securities fraud and conspiracy to commit securities fraud. The investigation is ongoing.
-IE Staff