Two Hong Kong Firms Resolve Insider Trading Investigation for $11 Million

March 11, 2014 — People who work in the financial industry may often be tempted by confidential insider information that could be misused to turn a personal profit. But trading on nonpublic information is illegal. To redress the problem of insider trading, the U.S. Congress established a whistleblower program as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Informants who notify the Securities and Exchange Commission (SEC) with tips about insider trading may be rewarded for collaborating with the government. Whistleblowers may be eligible to receive significant financial compensation, provided the government recovers more than $1 million.

SEC Recovers $30 Million Total from Firms Trading Nexen Shares Ahead of Public Announcement of CNOOC’s Acquisition

Two Hong Kong-based asset management firms — China Shenghai Investment Management Limited and CITIC Securities International Investment Management (HK) Limited — have consented to pay almost $11 million to resolve allegations of insider trading in shares of Nexen Inc, a Canadian energy company. China Shenghai’s share of the settlement is $4.3 million and CITIC Securities’ portion is $6.6 million.
In July 2012, the SEC learned that several traders were poised to make over $13 million from trades in Nexen securities made from brokerage accounts in Hong Kong and Singapore a few days before the news became public that the Chinese company, CNOOC Ltd., would acquire the company. Nexen shares shot up 50 percent following the announcement.
The SEC promptly filed an emergency action to freeze the assets in suspicious accounts and then began investigating to identify the traders involved. The agency has now recovered almost $30 million in ill-gotten gains and financial penalties. China Shenghai and CITIC Securities are the last of the frozen accounts to reach a settlement with the SEC.

Whistleblowers Notify SEC of Insider Trading

Insiders with asset management firms should ensure that they understand the Dodd-Frank whistleblower process before they come forward. The financial crimes lawyers at Waters & Kraus have the experience necessary to protect whistleblowers’ rights in insider trading cases. Contact us by eamil or phone our SEC fraud lawyers at 855.784.0268 to discuss how we can assist you.

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