Litigation Release No. 19867 / October 13, 2006

Securities and Exchange Commission v. One or More Unknown Purchasers of Call Options for the Common Stock of CNS, Inc., Civil Action No. 06-4540 (E.D. Pa. October 12, 2006)

SEC Files Insider Trading Action and Obtains Emergency Freeze of Proceeds from Sales of CNS, Inc. Call Options Purchased Through Foreign Accounts

On October 12, 2006, the SEC filed a complaint against certain unknown purchasers of call options of CNS, Inc. (the "Unknown Purchasers"), alleging that they engaged in insider trading in advance of the October 9, 2006 public announcement of a $566 million merger between CNS, Inc. ("CNS") and GlaxoSmithKline plc ("Glaxo"). The Commission also applied for emergency relief that included an asset freeze to prevent the defendants from removing the proceeds from sales of the options beyond the jurisdiction of the Court. The Honorable Eduardo C. Robreno, United States District Judge, Eastern District of Pennsylvania, issued a Temporary Restraining Order freezing over $650,000 in sale proceeds and ordering the Unknown Purchasers to appear before the Court on October 20, 2006, to show cause why the Court should not enter a preliminary injunction extending the asset freeze and other ancillary relief entered in the Temporary Restraining Order until a final adjudication of the case may be made on the merits.

In its complaint, the Commission alleges that the Unknown Purchasers purchased near-term, out-of-the money call option contracts for the common stock of CNS through foreign accounts held at U.S. broker-dealers. The foreign accounts were omnibus accounts in the names of Z¼rcher Kantonalbank (Zurich Cantonal Bank) and Credit Suisse, and were held at U.S. broker-dealers National Financial Services LLC and Swiss-American Securities, Inc., respectively. The Commission also alleges:

Between September 27 and October 2, 2006, Unknown Purchasers bought a total of 1186 out-of-the-money CNS call option contracts. These purchases represented approximately 67% to 100% of the daily volume of the various CNS options series on the days purchased.

The Unknown Purchasers' trading coincided with key non-public and confidential events leading up to the announcement that Glaxo would acquire CNS. Specifically, Glaxo was one of several companies contacted by investment bankers on behalf of CNS in August 2006. After Glaxo had executed a confidentiality agreement, Glaxo was invited to submit a binding offer for CNS by September 29, which it did. On October 2, the CNS Board met to review the offers, and Glaxo was informed that it was one of two finalists and that it should submit a best and final offer by October 4.

On Monday, October 9, 2006, before the opening of the New York securities markets, CNS and Glaxo announced the execution of an agreement whereby Glaxo would acquire CNS for a price of $37.50 per share - a 31% premium over the closing price of CNS stock on Friday, October 6. On the date of the announcement, CNS shares closed at $36.72 - a 28.5% increase over the closing price of CNS stock on Friday, October 6.

On October 9 and 10, 2006, following the announcement of the merger between CNS and Glaxo, the Unknown Purchasers sold the CNS options in both accounts and realized net profits of approximately $651,895.

In the pending lawsuit, the Commission alleges that the unknown defendants engaged in illegal insider trading in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The complaint seeks permanent injunctive relief, the disgorgement of all illegal profits, and the imposition of civil monetary penalties.

The Court's Temporary Restraining Order freezes the proceeds generated through the insider trading of CNS call options in the U.S. brokerage accounts. In addition, the Order requires the Unknown Purchasers to identify themselves, provides for expedited discovery, prohibits the defendants from destroying documents, and permits alternative means of service of process.

The Commission acknowledges the assistance of the Chicago Board Options Exchange in the investigation of this matter.