Macquarie to Pay $15 Million in Puda Coal Case--Update

By Chelsey Dulaney 

Australia's Macquarie Group Ltd. will pay $15 million to settle Securities and Exchange Commission charges related to its New York-based brokerage unit's 2010 underwriting of a public offering by China-based Puda Coal.

According to the SEC, Macquarie Capital was the lead underwriter on Puda Coal's secondary offering and knew that some of its materials contained false information. In 2012, the SEC charged executives of Puda Coal with defrauding investors into believing they were investing in a Chinese coal company when in fact they were investing into an empty shell company.

Macquarie has also agreed to cover the costs of setting up a fund to compensate investors who suffered losses after buying into the offering. According to the SEC, Macquarie made $4.17 million as underwriter.

"Macquarie takes its compliance and regulatory obligations very seriously, and has worked closely with the SEC to provide relevant information," a Macquarie spokesperson said. "Under the terms of the settlement, Macquarie has neither admitted nor denied the SEC's allegations."

According to the SEC, Puda Coal, which had traded on the New York Stock Exchange, said in offering documents that it held a 90% ownership stake in a Chinese coal company.

Macquarie repeated those statements in its own marketing materials despite having received a diligence report that showed Puda Coal didn't own any part of the coal company. According to corporate filings in the People's Republic of China, Puda Coal's chairman had transferred ownership of the company to himself and then sold nearly half of his interest. As a result, Puda Coal no longer had an ownership stake or source of revenue.

The SEC on Friday also charged former Macquarie Capital managing director Aaron Black and investment banker William Fang for failing to act after reading the report. Mr. Black agreed to pay $212,711 and Mr. Fang agreed to pay $35,000 to settle the charges, the SEC said.

Write to Chelsey Dulaney at [e-mail]

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