Over $4 million in bribes involved: executives at two securities firms and one hedge fund arrested

Beijing Business Daily (Reporter Liu Yuyang) — On March 12, the Hong Kong Securities and Futures Commission (SFC) announced that it, together with the Independent Commission Against Corruption (ICAC), conducted joint operations targeting insider trading and corruption from March 10 to 11. Senior management personnel from three licensed companies were involved, including two securities firms and one hedge fund management company.

During the operation, officials from the SFC and ICAC searched a total of 14 locations, including offices of licensed companies and the residences of those arrested. The ICAC also detained six men and two women aged between 35 and 60. Those detained include senior management from two licensed securities firms and a licensed hedge fund management company, as well as an intermediary.

The SFC and ICAC suspect that senior management from the licensed securities firms accepted bribes exceeding $4 million from the owner of a licensed hedge fund management company to disclose confidential information about share placements of multiple Hong Kong-listed companies before the information was publicly released. Using this insider information, the hedge fund management company established short positions through market short selling and/or equity swap contracts. After the share issuance information was announced, the stock prices dropped, and the hedge fund reportedly profited approximately $315 million from these short positions.

The SFC stated that the joint operation was initiated following a preliminary investigation into suspected insider trading activities, which uncovered potential corruption. The case has been handed over to the ICAC for further investigation into suspected corruption, while the SFC is focusing on investigating insider trading and other misconduct under the Securities and Futures Ordinance.

Before the market opened on March 12, Guotai Junan International issued a statement saying that on March 10, the SFC and ICAC visited the company’s main Hong Kong office to execute search warrants and seized some documents. An employee (not a board member) was detained by the ICAC. The company has immediately suspended all operations, duties, and powers of the involved employee until further notice.