A recent big news in the HK compliance field is that a former managing director at Morgan Stanley Asia Ltd has been arrested and charged for insider dealing and counselling or procuring another person to deal in a listed company's shares prior to the announcement of an acquisition deal.
Mr Du Jun was detained at the Hong Kong International Airport last Thursday after arriving from Beijing and appeared at the Eastern Magistracy last Friday. He is no longer employed by Morgan Stanley and has been residing mainly in Beijing since last year. No plea was taken and the case was adjourned to 5 Sep 2008 for transfer to the District Court. He was granted bail but was ordered to surrender all travel documents and report to the Police twice a month.
The arrest was made following an SFC investigation with Morgan Stanley's cooperation (by reporting Du's trading to SFC in May 2007). The charges allege that on nine occasions between 15 Feb 2007 and 30 Apr 2007, Du dealt in the shares of CITIC Resources Holdings Ltd (CITIC Resources), a company listed on SEHK, whilst in possession of material and price sensitive information not known to the market. The information related to a proposed deal by CITIC Resources to acquire oil field assets, which was announced on 9 May 2007.
It is alleged that Du obtained the information while he was part of a Morgan Stanley team involved in advising CITIC Resources. The charges relate to a total of 26.7 million shares in CITIC Resources allegedly acquired by Du at a cost of about $86 million. On 30 Apr 2007, the last day Du was alleged to have bought CITIC Resources shares, the share price of CITIC Resources closed at $3.68. The price rose by 13.86% to $4.19 on the day of the announcement. Du is also alleged to have counselled or procured his wife Ms Li Xin, who is not facing any charges, to deal in CITIC Resources shares on 27 Feb 2007.
This is a high profile case for SFC to demonstrate its teeth to hunt a tiger. Morgan Stanley's surveillance system and whistle blowing also take the credit.
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