Washington, 27 July (Argus) — The US Securities and Exchange Commission (SEC) has accused a Hong Kong firm and traders in Singapore of engaging in insider trading ahead of Chinese state-owned oil firm CNOOC's $17.9bn bid for Canadian independent Nexen.
The SEC obtained an emergency court order to seize the assets of Hong Kong-based Well Advantage and other, unknown traders in Singapore the agency alleges used insider information to reap more than $13mn by stockpiling Nexen shares ahead of the 23 July announcement.
Well Advantage is owned by Hong Kong businessman Zhang Zhi Rong, who the SEC said controls China Rongsheng Heavy Industries. Rongsheng is believed to have a “strategic cooperative agreement” with CNOOC.
“Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing insider information to place extremely timely trades and profit handsomely from their illegal acts,” Sanjay Wadhwa, deputy chief of the SEC Enforcement Division's market abuse unit, said.
In a complaint filed in US District Court in Manhattan, the SEC alleged Well Advantage and other traders had material, nonpublic information about the impending bid. CNOOC and Nexen each trade on the New York Stock Exchange.
Well Advantage purchased 831,000 Nexen shares on 19 July and had an unrealized trading profit of $7.2mn by the close of trading the day of the announcement. Well Advantage had no history of buying Nexen stock, the SEC said. Well Advantage then placed a sell order to liquidate its position in Nexen yesterday.
Traders in Singapore purchased more than 676,000 Nexen shares in the days leading up to the announcement after demonstrating scant interest in Nexen previously. Those traders sold their shares almost immediately, earning about $6mn, the SEC alleges.
The SEC managed to freeze $38mn in assets. The agency's investigation continues.
Officials from CNOOC and Nexen could not be reached for immediate comment.
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