Home -> Law Blog Directory -> Corporate & Securities Law Blogs -> Jim Hamilton's World of Securities Regulation

Corporate & Securities Law

: Jim Hamilton's World of Securities Regulation

By James Hamilton

Cross-Border Insider Trading Action Shows SEC Commitment to Protect Global Markets

Four Hong Kong residents have settled an SEC enforcement action charging them with illegal tipping and insider trading in the securities of a target company in the weeks before the public disclosure of an unsolicited $60 per share acquisition offer for the target. The alleged tip originated with a board member of the target company, who was also a member of Hong Kong's Legislative Counsel and Executive Committee. Without admitting or denying the allegations, the actors consented to the entry of injunction and disgorgement orders. The board member was ordered to pay a $8.1 million civil penalty. (SEC v. Wong, et al., SD NY, Litigation Release No. 20447).

The SEC said that the board member learned of the then-secret offer for the company and illegally tipped a close friend who, in turned, and with the help of relatives, purchased approximately $15 million worth of target company securities in their account at a global brokerage firm. They stood to make approximately $8 million in illicit profits had the SEC not won an emergency court order within days of the offer, freezing the account and stopping the money from moving half a world away.

SEC Chairman Christopher Cox emphasized that the action represented real-time cross border enforcement to protect the integrity of the global markets, as well as illustrating the valuable international partnerships the SEC is developing with other regulators, in this case the Hong Kong Securities and Futures Commission. More specifically, Linda Chatman Thomsen, Director of the Division of Enforcement, noted that the federal court enforcement action sends a forceful reminder to corporate insiders that they need to exercise careful discretion when discussing important business matters outside the boardroom and executive suite.

Full post as published by Jim Hamilton's World of Securities Regulation on February 06, 2008 (boomark / email).