Insider trading on TXU?

Confidentiality is critical in a private equity deal. In fact, prospective bidders for a company must sign very strenuous non-disclosure agreements before they can participate.

Basically, leaks can interrupt a deal and even derail it.

However, leaks seem to be common lately. For example, in the buyout process of Harrah's (NYSE: HET), there were two major leaks.

Well, the buyout for TXU (NYSE: TXU) may have had similar problems. After all, it was last Friday that CNBC reported that a deal was imminent.

Also, according to a piece in the Wall Street Journal [a paid publication], there was heavy trading in TXU stock options on Friday (18,000 contracts). The stock price also spiked 4.1%.

In other words, some traders made a tidy profit. The problem: if they had access to nonpublic information, it is also illegal.

Basically, this is the kind of thing that hopefully the SEC is looking at. Yes, there could be a new scandal brewing.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.