Regulators have escalated an investigation into suspicious trades placed ahead of the $23 billion takeover of H. J. Heinz, focusing on a complex derivative bet routed through London, according to two people briefed on the matter.
The development builds on a recent regulatory action mounted against a Goldman Sachs account in Switzerland that bought Heinz options contracts. It also comes a week after the Federal Bureau of Investigation said it opened a criminal inquiry.
An unusual spike in trading volume in Heinz options a day before the deal was announced first attracted investigators. The Securities and Exchange Commission is also examining fluctuations in ordinary stock trades. The Financial Industry Regulatory Authority, Wall Street's self-regulatory group, recently referred suspicious stock trades to the S.E.C., a person briefed on the matter said.
Now the S.E.C. is looking into a more opaque corner of the investing world, examining a product known as a contract-for-difference, a derivative that allows investors to bet on changes in the price of stocks without owning the shares. Such contracts are not regulated in the United States, but are popular in Britain. Regulators there recently opened an inquiry into the Heinz trades, one of the people briefed on the matter said.
The expansion of the Heinz investigation illustrates the growing challenges facing American regulators. Charged with policing the American exchanges, authorities increasingly find themselves having to hunt through a dizzyingly complex global marketplace.
After a number of prominent crackdowns on insider stock trading, a campaign that scared the markets, investors are seeking subtler and more sophisticated tools to seize on confidential tidbits. Trading operations also flocked overseas, a careful move that forces the S.E.C. to navigate a maze of international regulations before identifying suspect traders.
The Heinz case illustrates the shift, as the S.E.C. relies on Swiss authorities to expose the trader behind the Heinz options bets.
The suspicious options trades were routed through a Goldman Sachs account in Zurich, where laws prevent the firm from sharing details of the account holder's identity. In a complaint filed two weeks ago, the S.E.C. froze the account of "one or more unknown traders." A federal judge upheld that freeze last week, a move that will prevent the traders from spending their winnings or moving the money.
The series of well-timed options trades, bets that produced $1.7 million in potential profits, came just a day before Berkshire Hathaway and the investment firm 3G Capital announced that they had agreed to buy the ketchup maker. News of the deal sent the company's shares, and the value of the options contracts, soaring.
The S.E.C. called the trading "highly suspicious," given that there was scant options trading in Heinz in previous months.
"Irregular and highly suspicious options trading immediately in front of a merger or acquisition announcement is a serious red flag," Daniel M. Hawke, head of the commission's market abuse unit, said recently.