11/26/2010 01:40 pm ET | Updated May 25, 2011

Regulators hot on Burger King Buyout

Like a lot of folks, I'm a burger lover. But as far as Burger King goes, I can take it or leave it.

Apparently, that's not the case with some investors who eagerly snapped up the stock of the parent company, Burger King Holdings, like they knew something good was going to happen.

Lo and behold, it did.

Call it luck, skill or what you will, but their timing was marvelous, coming as it did shortly prior to a September 2 announcement of an agreement for the acquisition of the nation's second biggest burger chain (12,150 fast food outlets) by a major investment global firm, 3G Capital, for $4 billion or $24 a share.

Rumors of the transaction circulated before the public announcement, so obviously there was a leak. In fact, in the week before the deal was announced, Burger King's stock ran up about 11%, indicating somebody thought they knew something positive.

It all created a foul odor, namely the specter of illegal trading and profiting on non-public, inside information.

Apparently, a couple of regulatory agencies suspect some skulduggery. They're the Securities and Exchange Commission ((SEC) and the Financial Industry Regulatory Authority (FINRA), both of which, I've learned, have recently kicked off investigations into the trading of Burger King shares prior to the disclosure of the buyout.

In this context, the two agencies have sent inquiries to the brokerage community, seeking the names of individual clients who traded in the company's shares in specific time periods before the transaction was publicly revealed.

Both agencies declined comment, but I've obtained copies of internal SEC and FINRA documents from a regulatory contact, which detail the Burger King trading investigations by the two agencies, as well as other trading probes.

It's unclear if these regulatory investigations will also embrace discussions with Burger King itself, as well as three investment firms which signed off on the deal and own a total of 31% of the company's stock. They are affiliates of TPG Capital LP, Goldman Sachs Capital Partners and Bain Capital.

What is clear is that the yen to make a fast buck by trading on inside information continues unabated despite the crackdown by regulatory bodies to stop this practice.

Indicative of this, the Federal Bureau of Investigation recently initiated several well publicized insider trading probes related to hedge funds.

In addition, a bunch of additional trading investigations have been launched by the SEC and FINRA, which are also confirmed by copies of internal documents that I have obtained.

These companies include Baxter International, CMR Group, J. Crew Group, Barrick Gold, Flagstar Bancorp, Rick's Cabaret, Symmetry Medical, 3Par, Airtran Holdings, which has agreed to be acquired by Southwest Airlines, Praxair, McAfee, Prospect Medical Holdings, Expressjet Holdings and Pactiv Corp.

In addition, the SEC is seeking further trading information about several investigations I've reported earlier. These are Intel, V.F. Corp. and Bausch & Lomb.

These investigations all center on regulatory efforts to catch the bad guys, who, it seems, are becoming increasingly more conspicuous. In this context, you might want to pick up a copy of a book called Financial Serial killers. An informative, lively and riveting read, it zeroes in on the scams of swindlers, hustlers and con men and how to avoid them.

The book, written by Houston securities attorney Tom Ajamie and Bruce Kelly, an editor at Investment News, is relevant reading now because investment scams are sharply on the rise, both nationally and internationally, especially so on the web.

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