LONDON — According to the New York Times, Schroder Salomon Smith Barney is conducting an internal investigation into suspicious trades in the shares of Railtrack, the insolvent company that owns Britain’s railroad tracks and stations, a spokesman for Schroder Salomon Smith Barney said today.
Formal trading in Railtrack, which is in a form of bankruptcy proceedings known as administration, has been suspended on the London Stock Exchange since Oct. 8. But investors can still trade it by independently matching buyers and sellers in the so-called gray market.
The Financial Services Authority has been examining trades on the gray market made around March 25. On that day, Stephen Byers, the transportation secretary, announced a plan to pay Railtrack shareholders £1.3 billion ($1.9 billion) in compensation for the part played by government budget and policy decisions in the company’s financial woes.
Schroder Salomon Smith Barney, an investment bank unit of Citigroup, is acting as an adviser to the government on the reorganization of Railtrack.
The investigation is focusing on the purchase of 500,000 Railtrack shares deposited in an account run by Vidacos, a clearing and settlement firm also owned by Citigroup.
The Sunday Times of London reported the trades over the weekend.
“We take any suggestion of insider dealing very seriously,” a spokesman for Schroder Salomon Smith Barney said. “And we’ll be conducting an internal investigation. We have robust Chinese walls and procedures in place, which are designed to prevent insider trading.”
Deborah Fowler, a spokeswoman for the Financial Services Authority, said the examination into the Railtrack trades was part of its routine surveillance of trading and that the matter had not become a formal investigation run by the authority’s enforcement arm.