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 tess.stynes@wsj.com
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