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Welcome to ComplianceAsia News

We aim to offer all of the latest developments we think are relevant to compliance professionals dealing with issues in financial regulation with a focus on the Asian region. Many of the articles are from the  the US and the UK because these are the principal locations that effect how firms operate in Asia outside of the regulator that is closest to your Asian operation.

Entries in insider dealing (6)

Tuesday
Apr272010

Hong Kong SFC increases its pressure on Tiger Asia

DateTuesday, April 27, 2010 at 9:11AM

The Hong Kong SFC has been in the middle of an action against Tiger Asia (a hedge fund manager based in New York) where the SFC claims that Tiger's actions constituted insider dealing when it sold short while in possession of alleged inside information relating to a placement.

The SFC has now made further claims about additional placements and this is reproduced below.

The case is important as it deals with an area not previously targetted by the SFC and also would set several precedents regarding the mechanics of the action if it is successful.

It shows the continued focus on the Enforcement Division at the Commission on activities in the professionals market.

The SFC announcement was:

SFC seeks trading ban against Tiger Asia over alleged insider trading

The Securities and Futures Commission (SFC) is seeking court orders to prohibit New York-based asset management company, Tiger Asia Management LLC (Tiger Asia), from dealing in all listed securities and derivatives in Hong Kong in the light of further insider trading allegations concerning the shares of another bank -- Bank of China Limited (BOC).

This is the first time the SFC has sought orders from a court to exclude any entity from trading in the Hong Kong market.

The SFC has also amended the current proceedings against Tiger Asia and three of its senior officers, Mr Bill Sung Kook Hwang, Mr Raymond Park and Mr William Tomita (collectively referred to as “the Tiger Asia parties”) to include the new allegations and is seeking to freeze an additional amount of up to $8.6 million of Tiger Asia’s assets, equivalent to the notional profit Tiger Asia has allegedly made in one of the new claims.

This is on top of the $29.9 million that the SFC has applied to freeze when it first commenced proceedings in August 2009 against the Tiger Asia parties in relation to dealings by Tiger Asia in the shares of China Construction Bank Corporation (CCB) on 6 January 2009 (Notes 1 and 2).

The SFC alleges that in the case concerning BOC shares:

  1. Tiger Asia was given advance notice and was invited to participate in two placements of BOC shares by UBS AG and Royal Bank of Scotland on 31 December 2008 and 13 January 2009 respectively;
  2. Tiger Asia was provided with details of both placements after being told and agreeing the information was confidential and price sensitive;
  3. Tiger Asia also agreed not to deal in BOC shares after receiving the information;
  4. Tiger Asia short sold 104 million BOC shares before the placement by UBS AG on 31 December 2008 making a notional profit of $8.6 million; and
  5. Tiger Asia sold 256 million BOC shares before the placement by Royal Bank of Scotland on 13 January 2009 (of which 251 million shares were short sales) making a notional loss of around $10 million.


The SFC contends that these transactions constitute illegal insider trading in shares of BOC.

These allegations will be heard by the court in the same proceedings involving similar allegations against the Tiger Asia parties involving dealings in shares of CCB, at a date yet to be fixed.

In addition, the SFC is also seeking orders to unwind the transactions if the court finds they contravened the Securities and Futures Ordinance and to restore affected counterparties to their pre-transaction positions. The amount of assets that the SFC is seeking to freeze is to ensure there are sufficient funds to satisfy any restoration orders that may be made by the court.

End

Notes:

  1. Please see SFC press release dated 20 August 2009.
  2. The proceedings were commenced under section 213 of the Securities and Futures Ordinance. Tiger Asia was founded in 2001 and is a New York-based asset management company that specialises in equity investments in China, Japan and Korea. All of its employees are located in New York. Tiger Asia has no physical presence in Hong Kong. Park joined Tiger Asia in April 2006 and, at all times since, his job title has been Managing Director, Head of Trading, and his responsibilities include managing the trading desk, supervising orders and managing broker relationships. Tomita joined Tiger Asia in April 2008 and is charged with supporting the trading activities led by Park. Both Park and Tomita report to portfolio manager, Hwang, whom the SFC alleges made the trading decisions for the CCB and BOC trades. BOC has been listed on the Stock Exchange of Hong Kong Limited since 1 June 2006.
Article written by AuthorAlex Duperouzel | | | Print ArticlePrint Article | CommentPost a Comment
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Monday
Mar292010

SFC seeks to codify a requirement for public companies to dislcose inside information

DateMonday, March 29, 2010 at 6:49PM

The SFC has today drafted guidance on what constitutes “inside information", a new term used in the proposed legislation to mean “price sensitive information". “Safe harbours” and how they would apply are also described in the “Draft Guidelines on Disclosure of Inside Information”.

The SFC notice which was issued by way of an alert reads as follows:

Consultation begins on draft guidelines on disclosure of inside information

 

The Securities and Futures Commission (SFC) has begun soliciting public comments on a draft set of guidelines to explain “inside information” and its application, in parallel with the Government’s publication today of proposals to make it statutory for listed corporations to make timely disclosure of “price-sensitive information”.

The Government’s consultation paper (Note 1) proposes to include in the Securities and Futures Ordinance (SFO) a statutory requirement for a listed corporation to disclose to the public as soon as practicable “price-sensitive information” that has come to its knowledge.

As part of the proposals, the SFC has drafted guidance on what constitutes “inside information", a new term used in the proposed legislation to mean “price sensitive information". “Safe harbours” and how they would apply are also described in the “Draft Guidelines on Disclosure of Inside Information”.

“We support statutory backing of the disclosure obligation on listed companies as that would represent a key step to enhance transparency and the quality of Hong Kong’s securities markets,” said Mr Martin Wheatley, the SFC’s Chief Executive Officer. “The proposed guidelines are intended to help issuers comply with the proposed statutory rule. We will continue to liaise with the Government on related initiatives, including direct access to the Market Misconduct Tribunal.”

As the proposed definition of “inside information” is the same as that of “relevant information” used in existing and prior legislation related to insider dealing (Note 2), the guidelines quote decisions of Hong Kong tribunals reached previously on insider dealing. Decisions of these tribunals regarding “relevant information” are helpful in understanding what the proposed statutory regime means when referring to “inside information”.

The public is invited to submit comments to the SFC on the draft guidelines by 28 June 2010. Written comments may be submitted online via the SFC website, by e-mail to cfdconsult@sfc.hk, by post or by fax 2810 5385.

End

Notes:

1. A copy of the Government’s consultation paper “Consultation Paper on The Proposed Statutory Codification of Certain Requirements to Disclose Price Sensitive Information by Listed Corporations” is available on its website at www.fstb.gov.hk.
2. Under the Government’s proposals, a listed corporation is obliged to disclose to the public as soon as practicable any “price sensitive information” that has come to the knowledge of the listed corporation. In defining “price-sensitive information,” it is proposed that its definition will replicate the definition of “relevant information” in section 245 of the SFO, which a person is prohibited from using when dealing in the securities of a listed corporation. It is proposed that the SFO will use the term “inside information” to refer to the “price-sensitive information” that a listed corporation needs to disclose.

Article written by AuthorAlex Duperouzel | | | Print ArticlePrint Article | CommentPost a Comment
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Thursday
Mar252010

SFC in Hong Kong bans former fund manager for life

DateThursday, March 25, 2010 at 3:27PM

The SFC website reported that it had banned Mr Ryan Fong (formerly from HSZ in Hong Kong) for life following his conviction in relation to insider dealing.  Mr Fong was previously sentenced to 12 months imprisonment in one of the SFC's early prosecutions of financial professionals involved in insider dealing.

The SFC report was:

The Securities and Futures Commission (SFC) has banned Mr Ryan Fong Yen-hwung, a former portfolio fund manager at HSZ (Hong Kong) Ltd (HSZ), from re-entering the industry for life (Note 1).

The disciplinary action follows Fong’s conviction for insider dealing in July 2009 at the District Court (Note 2). Fong was sentenced to 12 months’ imprisonment and ordered to pay a fine of $1,372,218.

The SFC’s investigation found that in 2005, Fong received confidential and price sensitive information about a proposed takeover by JCDecaux Pearl & Dean Ltd of the controlling interests in Media Partners International Holdings Inc (Media Partners) from Mr Allen Lam Kar Fai, a former director of investment banking at CLSA Equity Capital Markets Ltd.

Fong took advantage of the information and purchased Media Partners shares which he then sold at a profit after the announcement of the transaction was made to the public. The misconduct involved coded emails between Fong and Lam designed to cover up the wrongdoing and prevent detection.

End

Notes:

  1. Fong was licensed under the Securities and Futures Ordinance to carry on Type 4 (advising on securities) and Type 9 (asset management) regulated activities and was accredited to HSZ from 2004 to 2006. His licence was revoked in March 2006 and he does not currently hold an SFC licence.
  2. Please see SFC press releases dated 7 July 2009 and 20 July 2009.
Article written by AuthorAlex Duperouzel | | | Print ArticlePrint Article | CommentPost a Comment
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Monday
Dec142009

UK Corporate Broker & Father Receive Jail Time for Insider Dealing

DateMonday, December 14, 2009 at 10:05PM

by Karl Hindle - London, UK

Matthew Uberoi, a corporate broker intern was sentenced to 1 year in jail for insider trading, while his father received a 2 year sentence.  The two men were found guilty after the FSA brought a prosecution which is only the second insider dealing case to date.

The pair were found guilty in November but received their sentencing last week at Southwark Crown Court but the proceedings have not yet finished.  A further hearing is taking place today to determine the level of confiscation of assets required to strip the pair of their unlawful gains – the judge has already certified that the full benefit of the trades is GBP £288,050.05 rendering a profit of GBP £110,000.

Using emails and an internet forum on share dealing, the pair communicated using a code borrowed from a Chinese takeaway menu. In passing sentence, Judge Testar stated that the two men had behaved “dishonestly and deliberately so” and made special reference in respect of the lack of cooperation with the FSA investigation and the trial proceedings. The father was sought out for particular approbation, as the judge said of him,

“I’m afraid he was very dishonest in front of the jury. Some of the things he said could be described as breathtaking.” 

 Margaret Cole, Director of Enforcement and Financial Crime at the FSA stated,

"The sentences Matthew Uberoi and his father are facing clearly demonstrate that insider dealing is a serious crime with serious consequences.”

This successful prosecution will only encourage the FSA to use the criminal legal system even more, and already there are a string of further prosecutions lined up in the system.  As Cole further stated,

"This is our second successful criminal prosecution and there are more to come. Our recent successes reinforce the FSA’s credibility as a prosecutor.  We are determined to do whatever is necessary to ensure that insider dealing is no longer seen as a way to make a quick profit but as a crime that does not pay."
 

More Cases on the Way

The Court of Appeal rejected an appeal by the first party to be convicted of insider dealing; Christopher McQuoid’s appeal against an 8 month sentence was rejected.  The Court of Appeal reiterated that insider dealing is not a victimless crime and as it undermines public confidence in the financial system, public prosecutions and jail terms are more appropriate than regulatory action.

Judicial statements such as these will only add fuel to the FSA’s drive to prosecute other cases and three more cases will be heard early in 2010.

Malcolm Calvert is due for trial on 15th February 2010; Neil Rollins on 12 April 2010 and Messrs. King, Rimmington and McFall on 19th April 2010.


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Tuesday
Nov242009

Mr Allen Lam Kar Fai banned for life by SFC

DateTuesday, November 24, 2009 at 5:05AM

On 23rd November 2009 The Securities and Futures Commission (SFC) reported that it had banned Mr Allen Lam Kar Fai from re-entering the industry for life. This follows the revoking of his licence in 2006.  (Note 1).

The disciplinary action follows Mr Lam’s conviction for insider dealing in July 2009 at the District Court (Note 2). He was sentenced to six months’ imprisonment and ordered to pay a fine of HK$69,000.

Mr Lam was investigated after he gave confidential and price sensitive information to a fund manager before it was public. The fund manager, Ryan Fong,  then took advantage of the information. Mr Fong has been sentenced to 1 year imprisonment and order to pay a fine of nearly HK$1.4 million. There has been no comment on any action taken by SFC to penalise or ban Mr Fong.


Mr Mark Steward, the SFC’s Executive Director of Enforcement  said “The SFC expects licensees will safeguard confidential, price sensitive information, not exploit it. Lam’s conduct violated the trust expected of him as a licensee. There is no place for licensees who misuse confidential information and enter into arrangements like this to deceive the market,”

Notes:

1. Lam was licensed under the Securities and Futures Ordinance to carry on Type 6 (advising on corporate finance) regulated activity and had been accredited to CLSA Equity Capital Markets Ltd (CLSA) since 2001. His licence was revoked in June 2006 and he does not currently hold an SFC licence.
2. Please see SFC press releases dated 7 July 2009 and 20 July 2009.

 

For the full details please use the following Mr Allen Lam Kar Fai

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Saturday
Nov142009

Khuzami and Octopussy

DateSaturday, November 14, 2009 at 12:27PM

By Lisa Valentine

Who says the SEC doesn’t have a sense of humor?

During a press conference last week in New York City, Robert Khuzami, Director of the SEC Division of Enforcement, showed his lighter side as he described the criminal antics of an insider-trading ring.

Apparently, one of the operatives was nicknamed “Octopussy” from the James Bond film because he had his “arms in so many sources of inside information.” He also had a habit of destroying information by removing the SIM card in his cell phone and biting it in half. Said Khuzami, in a warning to others who may find themselves in James Bond-like scenarios: “Certain moral truths should be self-evident. And there should be a moment—hopefully before you’re holding a bag of cash delivered to you by somebody code-named “the Octopussy” – that causes anyone in a position to tip or trade inside information to think twice before taking such a misguided step.

“And if you find yourself chewing the memory card in your cell phone to destroy any record of your misconduct, something has gone terribly wrong with your character.”

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