Hong Kong-Based Firms Agree To Settle Insider Trading Case

   By Tess Stynes 
 

The Securities and Exchange Commission said that two Hong Kong-based firms--which managed accounts frozen in a major insider trading case in 2012--have agreed to pay nearly $11 million to settle allegations against them.

The SEC filed the emergency action after discovering that unknown traders using brokerage accounts in Hong Kong and Singapore stood to make more than $13 million in potentially illicit profits from trading ahead of the public announcement of Chinese oil company Cnooc Ltd.'s $15.1 billion deal for Canadian energy producer Nexen Inc.

The SEC on Monday stated that Citic Securities International Investment Management (HK) Ltd. and China Shenghai Investment Management Limited agreed to pay $6.6 million and $4.3 million respectively. The firms neither admitted nor denied the allegations.

The SEC said that once investigators located the suspicious accounts and froze their assets, the firms worked with foreign regulators and scrutinized the trading records to identify the traders, setting the stage for a string of settlements.

Combined with earlier settlements in the case, the SEC said that it has recouped nearly $30 million in illegal gains plus penalties from foreign traders. The moves "sent a strong deterrent message that insider trading in the U.S. even if carried out from overseas simply doesn't pay," said Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York Regional Office.

The settlement with Citic Securities, includes disgorgement of $3.3 million and a $3.3 million penalty.

The settlement with China Shenghai includes the disgorgement of illegal profits totalling $4.3 million by the firm and eight clients.

The SEC had alleged that certain unknown traders were in possession of material nonpublic information about the impending deal when they purchased Nexen's stock in the days leading up to the public announcement. According to an SEC complaint, CNOOC and Nexen disclosed the deal before the markets opened on Monday, July 23, 2012. Nexen's stock subsequently rose sharply that day to close at nearly 52% above the previous Friday's closing price.

Write to Tess Stynes at [e-mail]

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