The SEC has frozen the assets of four Chinese citizens and a China-based entity, in response to alleged insider trading related to the acquisition of Global Education and Technology Group (GETG), a language-testing company, by Pearson, the publisher of the Financial Times.
Sha Chen, Song Li, Lili Wang, and Zhi Yao – all of whom have US brokerage accounts – are alleged to have purchased American depository shares of Beijing-based GETG in the two weeks prior to the public announcement of the group’s planned merger with Pearson, on 21 Nov.
According to the SEC, the four individuals “bet heavily” on the shares, with some purchases in excess of their stated annual incomes. After the merger was announced, the traders quickly began selling the shares, allowing them to pocket combined illicit gains of more than $2.7m.
The SEC alleges that Chen, Li, Wang, and Yao purchased the shares while in possession of material, non-public information about the merger. A GETG co-founder and chairman of the board apparently tipped the four traders “and possibly others” about the potential deal, it said.
All Know Holdings Ltd and “one or more unknown purchasers” of GETG stock were also charged. An emergency court order obtained on 5 Dec freezes more than $2.7m of defendants’ assets held in US brokerage accounts, and prevents them from destroying evidence.
In addition to the emergency relief, the SEC said it is seeking “permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties”.
The Monetary Authority of Singapore, meanwhile, has taken action against Yao Hongyuan regarding the trading last year of shares in Shanghai Asia Holdings Ltd (SAHL), a company listed on the Singapore stock market.
According to the MAS, SAHL announced on 29 July, 2010 that a third party had approached the company to acquire its assets.
In May of that year, Yao, who introduced the potential buyer to SAHL, purchased 364,000 SAHL shares while in possession of non-public, price-sensitive information concerning the deal.
Yao, a Chinese national based in Jiangsu, admitted to contravening section 218(2)(a) of the Securities and Futures Act and paid S$50,000 ($39,000) to the MAS, without court action. The regulator said Yao had cooperated fully with it during the course of its investigation.