08/01/2010 10:30 pm ET | Updated May 25, 2011

SEC Eyes $12 Billion of M&A Deals

Call it business as usual on Wall Street. In this case, that's monkey business.

Here's the story. With corporate coffers brimming with cash, borrowing costs puny because of near zero interest rates and companies hungry for growth opportunities in a sluggish economic environment, merger and acquisition activity is percolating again.

So, too, is the pace of stock trading investigations by the Securities and Exchange Commission into such transactions.

In this context, the SEC, I've learned, is looking into the trading that took place in the shares of five companies involved in four multibillion deals -- $12 billion all told -- that took place this year prior to the official announcements of these transactions.

The thrust: To determine, I'm told, whether anyone illegally traded on non-public, inside information.

The five M&A deals involve the following transactions:

--Continental Airlines' $3 billion merger with United Airlines.

--The $2 billion acquisition of Brink's Security Holdings by Tyco International.

--The $5.8 billion takeover of Sybase by SAP AG, a German business software company.

--The $1.2 billion buyout of Palm by Hewlett Packard.

The five companies whose trading is under SEC scrutiny are Continental Airlines, Brinks, Sybase, Palm and Hewlett Packard.

Whether these investigations are based on any specific knowledge or suspicions of wrongdoing or whether the SEC is simply fishing is unclear, but some regulatory contacts strongly suggest the former.

"The commission doesn't commence investigations based on maybes or guesswork," one former SEC enforcement attorney told me.

The SEC, adhering to its usual policy, declined to discuss the matter. "We don't confirm or deny investigations," an agency spokesman, John Heine, said.

However, the names of the five companies are disclosed in copies of internal SEC documents that the commission recently sent to the brokerage community in which it requested the names of the clients who traded in the shares in specific time periods. A regulatory source provided me with copies of these documents.

In addition to the five companies mentioned above whose trading is being investigated, the SEC recently sent out a bunch of brokerage inquiries involving a number of other
companies whose trading is being probed. In some cases, the inquiries to brokerage firms may represent the agency's quest for additional trading information.

Included in these additional trading investigations are some of the best known names in Corporate America. Among them are Tiffany & Co., JP Morgan Chase, Intel, Micron Technology, Federal National Mortgage Association (Fannie Mae), DirecTV and SPDR Gold Trust, one of the country's leading exchange-traded gold funds.

Also the focus of trading probes -- all of which are detailed in additional copies of SEC documents in my possession -- are, Thomas Weisel Partners Group, Dollar Thrifty Automotive, Interactive Data, Taiwan Semiconductor Manufacturing Co., Mariner Energy, Fidelity National Information Services, Biovail Corp. and Psychiatric Solutions.

Commenting on these assorted investigations, a compliance official at one large brokerage observed: "Maybe one of these days Wall Street will get the message that the regulatory climate has changed in this post-Madoff era, that it's preferable to live at home rather than in jail."

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