Did BNP officials hedge bets in front of U.S. sanctions?

France’s national financial prosecutor opened a preliminary probe into possible insider trading at BNP Paribas SA, the lender that paid a record fine for U.S. sanctions violations this year.

The inquiry started this month and it’s too soon to determine which individuals may be involved, a spokesman for the Paris-based prosecutor’s office said yesterday, declining to provide further details. The probe is at an early stage and could be dropped if no wrongdoing is found.

BNP Paribas was fined $8.97 billion in June for violating U.S. sanctions on countries including Iran, Sudan and Cuba. Prosecutors are examining stock sales by senior BNP officials during 2013, when U.S. authorities were looking into the bank’s dealings with banned countries, French weekly Le Canard Enchaine reported, without saying where it got the information.

“The period of the share sales seems very far from the time of the penalty,” said Thierry Marembert, a criminal defence lawyer in Paris who represented Edgar Bronfman Jr. in an insider trading case related to his tenure as vice chairman of Vivendi SA. “It will be difficult to establish that there was privileged information at a precise date.”

BNP Paribas spokeswoman Julia Boyce declined to comment.

The bank’s shares rose 0.5% to 48.60 euros by 2:18 p.m. in Paris trading. The stock has fallen 14% in 2014.

Stock Sales
Chairman Baudouin Prot, his predecessor Michel Pebereau and co-Chief Operating Officer Philippe Bordenave sold almost 290,000 shares for about 13 million euros ($16.3 million) during 2013, according to the bank’s annual report.

Prot sold shares at an average price of 44.20 euros, Pebereau at 49.25 euros, and Bordenave at 44.66 euros, based on the report. The Paris-based bank’s share price averaged 47.27 euros in 2013 and 53.05 euros so far this year.

Establishing the timeline of what BNP officials knew about potential U.S. penalties will be crucial in determining whether insider trading took place, Marembert said.

In February, the bank announced a $1.1 billion provision for a possible fine in the case, which it booked in the fourth quarter of last year.

The financial prosecutor’s office was created late last year to step up efforts against market abuse and tax fraud after French President Francois Hollande’s budget minister resigned when his secret Swiss bank account was exposed.


Image credit: Reinhardhauke, Creative Commons

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