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Two Hong Kong Firms Agree to Pay $11M to Settle SEC Insider Trading Charges

Friday, February 14, 2014

Feb. 11 — The Securities and Exchange Commission Feb. 11 announced that two Hong Kong-based asset management firms have agreed to pay nearly $11 million to settle insider-trading allegations involving the trading of Nexen Inc. stock ahead of the company's acquisition by a China-based entity (SEC v. Well Advantage Ltd., S.D.N.Y., No. 12-cv-05786-RJS, 2/11/14).

In a release, the SEC said China Shenghai Investment Management Ltd. agreed to disgorge ill-gotten gains totaling almost $4.3 million by the firm and eight clients on whose behalf Nexen stock was traded ahead of the announcement that the company would be acquired by CNOOC Ltd.

CITIC Securities International Investment Management (HK) Ltd. agreed to disgorge $3.3 million and to pay a $3.3 million penalty for buying Nexen shares in the U.S. for the accounts of two affiliates.

The two firms did not admit or deny the SEC's allegations.

Court Approval

Judge Richard Sullivan of the U.S. District Court for the Southern District of New York approved the China Shenghai settlement Feb. 11, and the CITIC settlement in late January.

The SEC filed an emergency action in 2012 to freeze the accounts of the firms and others after discovering that traders using brokerage accounts in Hong Kong and Singapore stood to gain more than $13 million in illegal profits from Nexen stock trades while in possession of nonpublic information about the pending acquisition.

China Shenghai and CITIC managed the last remaining frozen accounts in the case, the SEC said.

“The SEC's swift action in this case ensured that traders located on the other side of the globe were not only deprived of their illegal insider trading profits but eventually paid steep penalties,” Sanjay Wadhwa, senior associate director for enforcement in the SEC's New York Regional Office, said in the release. “Our efforts have recouped nearly $30 million and sent a strong deterrent message that insider trading in the U.S. even if carried out from overseas simply doesn't pay.”

The SEC's release is available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370540775561#.UvqfNoW8Aoo.

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