HONG KONG—Hong Kong's securities regulator said Thursday it charged a former Citic Pacific Ltd. executive with insider trading in the company's shares, the latest example of the watchdog's heightened efforts to combat market misconduct.
The Securities and Futures Commission alleges Chui Wing Nin, Citic Pacific's former deputy head of finance, avoided a loss of 1.36 million Hong Kong dollars (US$174,455) by acting on confidential, price-sensitive information about the company's foreign-exchange losses before it was disclosed to the market.
The charges come as the SFC takes an increasingly aggressive stance against insider trading, which wasn't even a crime in the Chinese territory until 2003.
The regulator scored a landmark victory in September 2009 when a judge sentenced former Morgan Stanley banker Du Jun to seven years in prison and fined him HK$23.3 million after he was convicted of the offense. The jail sentence is the maximum that can be imposed by Hong Kong's District Court, where Mr. Du was tried.
Mr. Chui, who is currently chief financial officer at mainland property developer Agile Property Holdings Ltd., Thursday pleaded not guilty in a local court to two counts of insider dealing alleging he sold a total of 81,000 Citic Pacific shares on Sept. 9 and Sept. 12, 2008, according to a statement from the regulator.
A representative from Agile Property declined to comment aside from saying Mr. Chui was not at work today. A representative for Citic Pacific said Mr. Chui left the company in July 2010 but declined to comment further. Mr. Chui couldn't be reached for comment.
Citic Pacific disclosed potential losses in October 2008 from what it said was an unauthorized bet on the Australian dollar, which slid against the U.S. dollar as financial markets crashed during the global financial crisis. It also said its board knew about the potential losses six weeks before they were disclosed. Citic Pacific later confirmed losses of US$1.89 billion for 2008 from that position.
Shareholders dumped the stock, wiping out two-thirds of the company's market capitalization in two days.
Hong Kong police and securities regulators began an investigation into the company, whose well connected chairman and managing director were ousted and replaced with bureaucrats from Citic Group, the business's Beijing-controlled parent.
The issue of when Citic Pacific's directors knew about the problem, and why they waited so long before telling shareholders, sparked a debate about corporate governance in Hong Kong and helped expedite new rules that will make failure to disclose price-sensitive information in a timely manner a finable offense.
Source:wsj