Insider Trading

CSRC Announces Draft Insider Trading Regulations
Asia Pacific

The People’s Daily Online (PDO) reports that the China Securities Regulatory Commission (CSRC) has issued draft regulations aimed at the prevention of insider trading. The draft regulations reportedly require “shareholders with a stake of more than 5 percent, shareholders with an indirect controlling stake, parties to mergers and acquisitions, brokerage firms and others with access to insider information” to register as “corporate insiders”.
PDO: China’s securities regulator steps up crackdown on insider trading (16 June 2011)

Related news items:
WSJ: China Securities Regulator Issues Draft Rules On Insider Trading (15 June 2011)
China Daily: CSRC steps up effort to tackle insider trading (16 June 2011)
(Source: PDO; WSJ; China Daily)

Insider Trading Case Seeks Crackdown of Expert Networks

Opening statements for the insider trading case against Winifred Jiau began early this week. The prosecution laid out its case against Jiau, accusing the former Primary Global Research consultant of sharing non-public information, supplied from sources inside other companies, with her hedge fund clients. The prosecution noted it had recorded phone conversations, emails, and trading records to back up their case against Jiau. Jiau defense attorney argued that while Jiau did pass along non-public information, none of the information she gave to her clients was material to a company’s stock price and therefore did not meet the threshold of inside information. This is the first case that has been brought to trial in the government’s crackdown against expert network.
New York Times: Insider Trial Opens With Focus on Expert Networks (2 June 2011)
(Source: New York Times)

Insider Trading Case Revelas Triangle of Deception

Sonny Nguyen, a former executive at Nvidia Corporation, admitted last week to providing Winifred Jiau, a consultant at the expert network firm Primary Global Research, with non-public financial results from his former company. Nguyen now faces up to five years in prison. A short time after, Sam Barai, founder of the hedge fund Barai Capital Management, admitted to making trades based upon non-public information he received from Jiau. Barai could be sentenced to up to twenty five years in prison. Jiau has pleaded not guilty to insider trading and her trial began earlier this week. Both Nguyen and Barai are cooperating with the government in the case against Jiau. To date, the government has charged thirteen people associated with expert networks with insider trading. Seven of those individuals have been linked to Jiau’s firm, Primary Global Research.
A Tangle of Details Emerge in an Insider Trading Case (27 May 2011)
(Source: New York Times)

SEC to Adopt Whistleblower Revisions After Narrow Margin Vote

The Securities and Exchange Commission (SEC) has approved the final rules to create the whistleblower program called for in the Dodd-Frank Act. The rules include several changes from the initial set that the SEC released for comment last year. Among the changes is a potential bonus for whistleblowers who first report wrongdoing through their internal compliance programs. Despite this change, the approved rules still drew criticism for not requiring whistleblowers to report wrongdoings internally before being eligible for any reward. The rules call for whistleblowers to receive payments of between 10%-30% of any sanctions imposed that exceed $1 million. Previously, the SEC had only been able to reward whistleblowers in insider trading cases and the rewards were limited to 10% of the sanctions imposed.
New York Times: S.E.C. Adopts Its Revised Rules for Whistle-Blowers (25 May 2011)
(Source: New York Times)

FSA Urges Govt to Increase Insider Trading Penalties
Europe, Middle East and Africa

The Financial Times reports that the UK Financial Services Authority (FSA) has urged the UK government to increase the maximum sentence for insider trading from seven to ten years, in a bid to toughen insider dealing penalties, following the recent conviction of Galleon hedge fund founder Raj Rajaratnam. FSA business conduct unit and overseas enforcement, markets and consumer protection interim head Margaret Cole reportedly opined that longer sentences for insider trading would “disincentivise people from doing it”. Although the FSA was recently granted  powers to negotiate plea bargains, UK’s low sentencing laws give defendants the impetus to “try their luck at trial”, the Financial Times reports. 
Financial Times: FSA wants tougher insider penalties (15 May 2011 – subscriber access only)
(Source: Financial Times)