WASHINGTON (Legal Newsline) - A Hong Kong-based firm charged with insider trading in July has agreed to settle with $14 million, double the amount of its alleged illegal profits, the Securities and Exchange Commission announced Thursday.
The proposed settlement is subject to approval of Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York.
Less than 24 hours after the firm placed an order to liquidate its position in Nexen Inc., the SEC filed an emergency action against Well Advantage to freeze its assets. Well Advantage allegedly had accumulated shares of stock in Nexen based on confidential information that the China-based CNOOC Ltd. was close to announcing an acquisition of Nexen. Illegal profits from shares totaling more than $7 million were sold by Well Advantage immediately after the deal was publicly announced, the SEC claims.
According to the SEC, prominent Hong Kong businessman Zhang Zhi Rong controlled Well Advantage as well as 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 and Associate Director of the New York Regional Office. "The speedy resolution of this case shows the serious consequences that await traders who engage in insider trading."
In the agreement, the SEC announced Well Advantage will pay $7,112,633.52 in illicit profits made from trading Nexen stock for the entry of a final judgment, and also pay an additional penalty of $7,112,633.52.
This proposed judgment will also legally prohibit Well Advantage from any future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5.
Well Advantage did not admit or deny any of the SEC's allegations.