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NEW YORK - A husband-and-wife pair of Wall Street analysts who allegedly used an online account in China to hide their illicit share trading have become the latest people caught up in a clampdown on insider trading.
The finance industry watchdog, the Securities and Exchange Commission (SEC), is battling a sudden surge in suspicious trading activity, as the boom in mergers and acquisitions provides opportunities to profit from deals in the pipeline.
In the latest case, Xujia "Jennifer" Wang, a 31-year-old analyst from Morgan Stanley, and her husband, Ruopian "Rubin" Chen, 34, a senior hedge fund analyst at ING's New York office, are alleged to have traded shares in three companies that Wang learned were being taken over. Morgan Stanley was advising on all three deals, the SEC said.
The couple are charged with three counts of securities fraud and one of conspiracy. They are alleged to have set up an account in the name of Wang's mother with an online brokerage in her native China, but the US authorities said her mother never accessed the account on the days the trades were made. Rather, the options trades in the acquired companies were traced to computers at ING and the couple's New Jersey home. In total, the couple made profits of more than US$600,000 ($814,000).
Daniel Hawke, the regional director of the SEC in Philadelphia, said the commission was making great strides in its efforts to deter insider dealing.
"People should understand that when they misuse online brokerage accounts to commit federal securities law violations they will be identified and caught."
The SEC moved quickly with their investigation into suspicious trading in Dow Jones shares before a US$5 billion takeover offer from Rupert Murdoch was made public this month, accusing a husband and wife from Hong Kong of insider trading.
The commission has already filed a civil suit in New York against Kan King Wong and Charlotte Ka On Wong Leung, claiming the couple bought 415,000 Dow Jones shares and engaged in "widespread and unlawful trading activity". They stood to make US$8.1 million from the tip-off from an insider.
And last week, a former Morgan Stanley compliance officer, Randi Collotta, and her husband pleaded guilty to conspiracy and securities fraud for their part in a 13-person insider dealing ring which amassed US$15 million in illicit profits before being broken.
When charges were brought against Collotta, 30, and Christopher Collotta, 34, the scam was described by the US justice department as one of the most pervasive on Wall Street in more than a decade.
Agreeing a takeover deal remains the most sure-fire way to get a pop in a company share price, so the current boom in mergers and aquisitions activity has provided record opportunities for those who know about the deals before they are announced.
The explosion in derivatives trading and the ease of setting up trading accounts, has increased perpetrators' belief that they can hide their tracks.
The New York Stock Exchange, which monitors share-price activity for signs of suspicious trading, says there is circumstantial evidence that insider trading is increasing.
Last year, it handed data on about nine suspicious deals a month over to the SEC, but that has risen to 12 this year.
- INDEPENDENT
