Who says U.S. regulators don’t pay enough attention to overseas investors these days? The SEC appears to be on the cusp of filing a lawsuit against Dow Jones Director David Li for an insider trading case that took place in Hong Kong.
Nothing has been proven yet. The Wall Street Journal (owned by Dow Jones) reports that Li, who’s chairman and CEO of the Bank of East Asia, has just received a Wells notice, which is the final step before action is taken. The case fascinates me because it shows how far afield the SEC will go to investigate suspicious trades. Even investors on the other side of the world will be pursued for activities in U.S. markets.
Li is a pal of Hong Kong businessman Michael Leung Kai Hung. Leung’s daughter and son-in-law happened to buy 415,000 shares of Dow Jones (thanks, in large part, to a loan of more than $3 million from Leung himself) two weeks before Rupert Murdoch’s bid for the company went public. Their profit (now frozen): $8 million. It reminds me of Sam Waksal telling his daughter to sell all of her stock in ImClone (which led the broker to tip off Martha Stewart, too) before a big decision came down—like the SEC wouldn’t come knocking as a result.
Big trades arouse suspicion, especially when they take place before big announcements. They’re easier to track, as are connections between individuals.(Full disclosure: I sold the stock I accrued as a Journal employee in Hong Kong during the late 1990s—two days after the news of Murdoch’s bid … Even my discount broker didn’t notice.)
Even if everyone is cleared of insider trading, this sends a powerful message to the global investment community.
How can you manage smarter? Bloomberg Businessweek contributors synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.