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Pharmaceutical

SEC probing insider trading before CNS, Glaxo deal

October 16, 2006
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U.S. securities regulators said they are investigating possible insider trading in the call options of CNS Inc. before the October 9 announcement of its merger with GlaxoSmithKline, Reuters reports. U.S. District Judge Eduardo Robreno for the Eastern District of Pennsylvania ordered that $655,000 in proceeds from the sale of CNS options be frozen and that the as yet to be identified purchasers appear in court on October 20, the SEC said. The trades were made in foreign omnibus accounts of U.S. broker-dealers in the names of Zurich Central Bank and Credit Suisse, the SEC said. The British healthcare company said that it agreed to pay $566 million in cash for CNS, the U.S. maker of non-prescription health products such as Breathe Right nasal strips and FiberChoice dietary fiber supplements. The SEC alleged that between September 27 and October 2, 2006, unknown purchasers bought 1,186 out-of-the-money CNS call option contracts—or approximately 67 percent to 100 percent of the trading volume in the various CNS options series on those days. The unknown traders sold the options on October 9 and 10 and realized $651,895 in now frozen profits, the SEC said.

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