A Hong Kong court on Monday jailed a former banker at regional brokerage CLSA and an ex-fund manager for insider dealing offences, the latest action under the city’s crackdown on market misconduct.
Allen Lam, former investment banking director at Hong Kong-based CLSA, was jailed for six months for tipping off Ryan Fong, ex-hedge fund manager at HSZ Ltd. on a takeover bid for Media Partners, an information services provider.
Fong was sentenced to a year in prison and fined 1.37 million Hong Kong dollars (180,000 US) for purchasing shares in Media Partners following Lam’s tip-off, enabling him to make over four million dollars in profit.
Deputy District Judge Eddie Yip said in sentencing that the offence was serious and imprisonment was an appropriate punishment for the defendants, both of whom had earlier pleaded guilty to their charges.
“Your conduct threatened the integrity of the financial market in Hong Kong and affected investors’ confidence,” he told the pair in the dock.
The prosecution was the eighth made by financial watchdog the Securities and Futures Commission (SFC) over the past 12 months, and its third case leading to a jailed sentence over insider dealing offences.
The latest conviction has underscored the regulator’s bid to toughen enforcement measures against market malpractice.
The SFC said in a statement earlier that Lam tipped off Fong in 2005 that a buyer would soon be acquiring a controlling stake in Media Partners.
CLSA acted as the financial adviser for the buyer in the takeover at the time, although Lam was not directly involved in the deal, it said.
Fong then went about accumulating 10.6 million Media Partner shares for himself and an HSZ fund he was authorised to trade for, at the price of 0.60-0.83 dollars per share, the SFC said.
The takeover was announced in September 2005 and the share price of Media Partners jumped dramatically. Fong sold his shares at 1.09-1.10 dollars per share, making a profit of 3.39 million dollars for the HSZ fund and 1.02 million dollars for himself.
The two stayed in contact via email, according to the regulator, using a code, “the French car,” to refer to the deal, the SFC said.