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  • CFO.com | US

Four Settle Dow Jones Insider Case

The case highlights the need for cross-border enforcement of securities laws in an era of global trading and instant communications.

Four Hong Kong residents, including a former Dow Jones board member, have agreed to pay $24 million to settle Securities and Exchange Commission insider-trading charges stemming from Dow Jones’ acquisition by News Corp.

The SEC alleges that David Li Kwok Po, chairman and CEO of the Bank of East Asia, learned of the then-secret News Corp. offer while he was on Dow’s board and illegally tipped his close friend Michael Leung Kai Hung.

Leung, with the help of his daughter Charlotte Ka On Wong Leung and son-in-law Kan King Wong, purchased about $15 million worth of Dow Jones securities in their account at Merrill Lynch, the SEC’s complaint alleges. They stood to make about $8 million had the SEC not won an emergency court order last May within days of the News Corp. offer, freezing the account and stopping the money from moving half a world away.

None of the four admitted or denied that allegations. However, David Li agreed to pay an $8.1 million civil penalty, Michael Leung $8.1 million in disgorgement plus prejudgment interest and an $8.1 million penalty, and K.K. Wong $40,000 in disgorgement plus prejudgment interest and a $40,000 civil penalty.

The SEC filed an emergency action against the Wongs on May 8 for allegedly trading on inside information. The court entered a temporary restraining order freezing assets and imposing other relief. In its amended complaint filed Tuesday, the commission alleges that K.K. Wong bought 2,000 Dow Jones shares in his TD-Ameritrade account and made approximately $40,000 in profits.

“Protecting the integrity of our markets in today’s world of global trading and instant communications requires real-time enforcement across national borders,” said SEC chairman Christopher Cox. “This case makes clear that the SEC will move fast, and decisively, not only in the United States but around the world to protect investors from insider dealings and threats to fair and open markets. It also illustrates the value of the significant international partnerships we are developing with our regulatory partners in other nations.”

When the SEC froze the accounts of Kan King Wong and Charlotte Ka On Wong Leung in May, it was one among a number of separate insider trading cases the regulator brought around that the time involving family members conspiring to trade.

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