By Maria Li
Earlier this week, the Securities and Exchange Commission (SEC) charged two New York-based hedge fund managers with insider trading. Sung Kook “Bill” Hwang of Tiger Asia Management and Tiger Asia Partners admitted to using material non-public information to short sell shares of Bank of China Ltd. and China Construction Bank Corp resulting in nearly $17 million in unlawfully gained profits. Tiger Asia covered its short positions with private placement shares that were obtained at a discount. Hwang agreed to settle with the SEC and pay $44 million in restitution and damages.
Tiger Asia Management focuses on trading in Asia. It is a spinoff from Tiger Management which was once one of the world’s largest hedge funds with $22 billion in assets under management in mid-1998. A four year-long probe by the Hong Kong Securities and Futures Commission (SFC) for insider trading forced Tiger Asia to return investor money in August 2012. In January 2009 and again in April 2010, the SFC sought to bar Tiger Asia from trading on the Hong Kong Stock Exchange and to freeze up to $38.5 million of the fund’s assets. Interestingly enough, Tiger Asia has no physical presence in Hong Kong because they have no office space or staff based primarily in the region.
Following news of the SEC’s charges, Japan’s Securities and Exchange Surveillance (SESC) proposed a $786,000 fine against Tiger Asia for manipulating the stock price of Yahoo Japan Corp. This ruling, if awarded, will set the record for the highest SESC fine for unfair trading.
News of the SEC settlement continues to set the trend for aggressive prosecution of illegal offshore trading. It is becoming increasingly clear that entities will no longer be able to evade charges simply by hiding behind a multitude of shell companies.
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