HK regulators probe $315m alleged insider trading gains

Joint SFC-ICAC raid targets executives.

Hong Kong’s securities regulator and anti-corruption agency have launched a joint probe into alleged insider dealing and bribery involving senior executives at three licensed corporations, with a hedge fund accused of making around $315m from trades linked to confidential share placement information.

The Securities and Futures Commission and the Independent Commission Against Corruption said they carried out operation “Fuse” on 10 and 11 March, searching 14 locations, including corporate offices and homes.

The ICAC arrested eight people, including senior executives from two securities firms, a hedge fund management firm, and a middleman.

The agencies allege that senior executives at the securities firms accepted more than $4m in bribes from the owner of the hedge fund management firm in exchange for disclosing non-public information on share placements in Hong Kong-listed companies before the deals were announced.

The hedge fund management firm is suspected of using that information to build short positions through market short selling and short equity swap contracts.

The SFC said the fund then allegedly profited after the relevant share prices fell once the placements became public.

The case began as an SFC investigation into suspected insider dealing before evidence of possible corruption was uncovered and referred to the ICAC. The agencies said the investigation is continuing and gave no further details.

Those involved are suspected of offences under Hong Kong’s Prevention of Bribery Ordinance, the Organized and Serious Crimes Ordinance, and the Securities and Futures Ordinance, including insider dealing, money laundering, and other misconduct.