A Hong Kong-based firm has agreed to settle insider trading allegations with U.S. regulators over China-based CNOOC Ltd.’s proposed acquisition of Canada’s Nexen Inc.
The U.S. Securities and Exchange Commission (SEC) announced Thursday that the firm, Well Advantage, which was charged with insider trading in July, has agreed to settle the case by paying more than US$14 million, which is double its alleged illicit profits.
Under the proposed settlement, which is subject to court approval, Well Advantage has agreed to the entry of a final judgment requiring it to pay out its US$7.1 million in profits made from trading Nexen stock, and a US$7.1 million penalty. It neither admits nor denies the charges.
The SEC filed an emergency action against the firm, freezing its assets less than 24 hours after the firm placed an order to liquidate its entire position in Nexen. It alleged that Well Advantage stockpiled shares of Nexen based on confidential information that CNOOC was about to announce its acquisition, and then sold those shares immediately after the deal was publicly announced. It notes that Well Advantage is controlled by prominent Hong Kong businessman who also controls another company that has a “strategic cooperation agreement” with CNOOC.
“If approved by the court, Well Advantage has agreed to give up all of its ill-gotten profits from these trades and pay a substantial penalty on top of that,” said Sanjay Wadhwa, deputy chief of the SEC enforcement division’s market abuse unit. “The speedy resolution of this case shows the serious consequences that await traders who engage in insider trading.”
The SEC notes that its investigation is continuing.