SEC Says Credit Suisse First Boston Broker’s Tips on TXU Used by Pakistani Banker

The SEC says it is requesting that the name of Pakistani banker Ajaz Rahim be added to the lawsuit charging the trading in of call options for TXU Corp that were based on insider information regarding an investment group’s leveraged buyout of the entity. The commission filed its third amended complaint in the U.S. District Court for the Northern District of Illinois.

The SEC is accusing Rahim of accepting tips offered by CSFP banker Hafiz Naseem, who is said to have misappropriated information from Credit Suisse, LLC, which advised TXU regarding the buyout.

Naseem was charged in connection to his alleged involvement in the controversy in the SEC’s second amended complaint. The SEC had issued allegations of insider trading just before the TXU buyout against “Certain Unknown Purchasers of TXU Call Options.

The SEC says that on five days last February, Naseem breached his fiduciary duties to his client and Credit Suisse when he informed Rahim of a proposed LBO of TXU by an investor group being led by Texas Pacific Group and Kohlberg Kravis Roberts & Co.

Rahim bought, through UBS AG London, 6,700 TXU call option contracts that had March 2007 expiration dates. He also purchased 15,000 shares of TXU stock from Bank Julius Baer Co. Limited. The commission says that these purchases let Rahim make about $5.1 million in unlawful profits following the announcement of the LBO.

The commission says that Naseem also told Rahim about upcoming deals with nine other issuers and that Rahim traded in these issuers’ securities at least 25 times within minutes of getting the information from Naseem. Rahim is also accused of allegedly buying securities with these companies, before public mergers were announced, via accounts at Bank Julius Baer Co. Ltd and/or Merrill Lynch Pierce Fenner & Smith. From these transactions, he illegally garnered $2.425 million in profits.

To make sure that he would gain personally and financially from his illegal behavior, Naseem opened a brokerage account in 2006 in Pakistan and gave trading authority to Rahim.

The SEC wants the court to order an injunctive relief against Rahim, as well as civil penalties and disgorgement.

For years, Shepherd Smith and Edwards has helped investors that have been the victims of securities fraud recoup their losses. Of the more than 1,000 clients we have represented in the United States, more than 90% of them have recovered all if not some of their losses. If you would like to speak with a securities litigation attorney, contact Shepherd Smith and Edwards to schedule an appointment for your free consultation.

Related Web Resources:

Securities and Exchange Commission Charges Ajaz Rahim, Pakistani Banker, With Insider Trading,
SEC: asset freeze against unknown foreign purchasers of call option for TXU Corp stock prior to acquisition announcement, Journal of Derivative Accounting
Read the SEC’s Third Amended Complaint (PDF)

TXU Corp.