Two Hong Kong-based firms to pay USD11m for insider trading
Two Hong Kong-based asset management firms, whose accounts were frozen in a major insider trading case by the Securities and Exchange Commission (SEC), have agreed to pay nearly USD11m to settle the charges against them.
The SEC obtained an emergency asset freeze in July 2012 against unknown traders just days after the announcement that China-based CNOOC had agreed to acquire Canadian energy company Nexen, causing more than a 50 per cent spike in the price of Nexen shares.
The SEC filed the emergency action after discovering that traders using brokerage accounts in Hong Kong and Singapore stood to make more than USD13m in potentially illicit profits.
Combined with earlier settlements in the case, the SEC has now obtained nearly USD30m in ill-gotten gains plus financial penalties from foreign traders who purchased Nexen stock while in possession of non-public information about the pending acquisition.
“The SEC’s swift action in this case ensured that traders located on the other side of the globe were not only deprived of their illegal insider trading profits but eventually paid steep penalties,” says Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York regional office. “Our efforts have recouped nearly USD30m and sent a strong deterrent message that insider trading in the US even if carried out from overseas simply doesn’t pay.”
CITIC Securities International Investment Management (HK) Limited and China Shenghai Investment Management Limited agreed to pay USD6.6m and USD4.3m respectively. These two firms managed the last remaining frozen accounts in the case. Once SEC investigators located the suspicious accounts and froze their assets, they worked with foreign regulators and carefully scrutinized the trading records to identify the traders, setting the stage for a string of settlements by firms and individuals:
• Hong Kong-based firm Well Advantage agreed to a USD14.2m settlement in October 2012.
• A Chinese businessman, his private investment company, and his wife and her brokerage customers agreed to a USD3.3m settlement in March 2013.
• A Singapore-based businesswoman agreed to a USD566,000 settlement in May 2013.
The settlement with China Shenghai requires disgorgement of all ill-gotten gains totalling USD4,268,057.16 by the firm and eight clients on whose behalf Nexen stock trades were made in the week leading up to the public announcement: Biggain Holdings Limited, Classictime Investments Limited, Feng Hai Yan, Gao Mei, Sparky International Trade Co., Stephen Wang Sang Wong, Zhang Jing Wei, and Zheng Rong. They neither admitted nor denied the allegations.
The settlement with CITIC Securities requires the firm to pay USD3,299,596.84 in disgorgement and a USD3,299,596.84 penalty for purchasing shares of Nexen stock in the US for the accounts of two of its affiliates. The firm neither admitted nor denied the allegations. The disgorgement amount represents the total profits that the firm and its affiliates obtained.
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