Magazine article American Banker

Pre-Buyout Surge in Thrift's Stock Raises Eyebrows

Magazine article American Banker

Pre-Buyout Surge in Thrift's Stock Raises Eyebrows

Article excerpt

The stock price of Chase Federal Bank surged 32% in heavy volume late Friday afternoon, before the thrift announced Monday it would be acquired by NationsBank Corp. (See story on page 1.)

The trading, which appears to indicate word of the deal leaked, has already prompted inquiries from the National Association of Securities Dealers, and could attract the attention of Federal securities regulators.

The stock of the Miami-based thrift, which on Friday traded at $5.50 as late as 1:34 p.m., closed at $7.25 that day. Volume topped 79,000 shares, or 12 times the daily average. More than two-thirds of that volume occurred in the last 90 minutes of trading.

"These facts will likely elicit an investigation by the National Association of Securities Dealers and the Securities and Exchange Commission," said Jack Coffee, a professor at the Columbia University School of Law, who specializes in corporate and securities law and white collar crime.

The agencies will look at whether insiders - the investment bankers, lawyers, brokers, and investors connected to these parties - made trades on this day, he said.

The securities dealers association, which regulates the Nasdaq securities exchange on which Chase Federal trades, contacted the thrift on Friday afternoon and Monday morning to inquire about the trading, said Frank Barbato, a company spokesman.

Chase Federal does not know why its stock acted irregularly, Mr. Barbato said. But after discussions with the securities dealers association, the company feels confident the agency will not pursue the issue further, he added.

A NASD official would neither confirm nor deny the agency was looking into the trading, but did concede Chase's Friday trading data could lead to an investigation.

"This kind of price increase, absent news or prior to news, would indeed be something that would set of some bells and whistles at our surveillance center," said Marc Beauchamp, a spokesman for the securities dealers association in Washington. …

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