from the Securities and Exchange Commission (SEC)
The Securities and Exchange Commission today announced that two Hong Kong-based asset management firms whose accounts were frozen in a major insider trading case have agreed to pay nearly $11 million 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 Ltd. had agreed to acquire Canadian energy company Nexen Inc., causing more than a 50 percent 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 $13 million in potentially illicit profits.
Combined with earlier settlements in the case, the SEC has now obtained nearly $30 million in ill-gotten gains plus financial penalties from foreign traders who purchased Nexen stock while in possession of nonpublic 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,” said Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York Regional Office. “Our efforts have recouped nearly $30 million and sent a strong deterrent message that insider trading in the U.S. 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 $6.6 million and $4.3 million 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 $14.2 million settlement in October 2012.
- A Chinese businessman, his private investment company, and his wife and her brokerage customers agreed to a $3.3 million settlement in March 2013.
- A Singapore-based businesswoman agreed to a $566,000 settlement in May 2013.
The settlement with China Shenghai, approved earlier today by Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York, requires disgorgement of all ill-gotten gains totaling $4,268,057.16 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, approved by the court in late January, requires the firm to pay $3,299,596.84 in disgorgement and a $3,299,596.84 penalty for purchasing shares of Nexen stock in the U.S. 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. The SEC acknowledges the cooperation of CITIC Securities and its parent company CITIC Securities International Company Limited in the investigation.
The SEC’s investigation was conducted by Simona Suh, Charles D. Riely, Michael P. Holland, and Joseph G. Sansone of the Enforcement Division’s Market Abuse Unit as well as Elzbieta Wraga and Aaron Arnzen of the New York Regional Office. The case has been supervised by Daniel M. Hawke and Sanjay Wadhwa. The SEC appreciates the assistance of the Hong Kong Securities and Futures Commission and the Financial Industry Regulatory Authority.
Leave a Reply