The Securities and Exchange Commission is investigating trading activity surrounding the July 2 offer by Ratners Group PLC, Britain's largest jewelry chain, to buy Alexandria-based Kay Jewelers Inc. for $328 million.

SEC attorney James A. Kidney disclosed the investigation yesterday during court hearings regarding government charges that nine Swiss bank employees bought Contel Corp. securities in the days before GTE Corp. announced a deal to acquire Contel.

Some of the foreign accounts that are the subject of the Contel-GTE probe also "seem to have been doing a lot of trading in Kay Jewelers," Kidney said.

Officials at Kay Jewelers could not be reached for comment.

Kidney made his comments while seeking a preliminary injunction to continue freezing accounts the SEC has identified as holding illegally obtained profits.

U.S. District Judge Charles Haight Jr. granted the injunction.

The SEC alleged in court papers filed July 13, the day after the Contel-GTE merger was announced, that "individuals or entities whose identities are yet unknown" used inside information about the deal to make a profit of at least $1 million.

On Friday, the SEC named four West Germans and three European groups that allegedly traded Contel securities based on inside information about the yet-undisclosed buyout. Nine Swiss bank employees bought Contel securities in the days before the Contel-GTE deal was announced, Kidney said.

The employees of Union Bank of Switzerland were the latest to be mentioned in the SEC's investigation of alleged insider trading that preceded disclosure of the $6 billion merger.

One of the Germans has told investigators he overheard a conversation about the pending merger at a restaurant, Kidney said.

He said it could take months before all the people involved are identified because the U.S. government would have to use international treaties to force the banks in Switzerland, West Germany and Luxembourg to identify their customers.