Got a Tip from a Friend on a CFD? In Australia It Can Cost You a Huge Fine and Jail Time
The Australian Securities Investment Commission took a CFD investor to court for insider trading charges. He may face years of
The Australian Securities & Investment Commission (ASIC) has announced that a 31-year old Sydney resident, Mr. Fei Yu, was brought before a court today to be charged with eight counts of insider trading related to his mother’s online CFD stocks account, following an ongoing ASIC investigation.
The maximum penalty associated with insider trading offences in Australia at the time they were committed by Mr. Yu ranges from 5 years in jail and a fine of $220,000. For offences committed after December 13, 2010, the penalties increased to a maximum penalty for individuals of 10 years in jail and/or a fine of $495,000. Mr. Yu allegedly made approximately $25,000 from the trades.
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ASIC alleges that Mr. Yu procured the acquisition of securities and aided and abetted the acquisition of contracts for difference (CFD) in Veda Advantage Limited in January 2007, during which time he had inside information about a proposed takeover of Veda by Pacific Equity Partners. According to the charges, Mr. Yu received the information from his close friend, Mr. Bo Shi Zhu, an executive in the corporate finance advisory division of Caliburn Partnership Pty Ltd (now called Greenhill & Co, Inc) who was advising Veda regarding the proposed takeover.
Mr. Zhu pleaded guilty in 2012 to several counts of insider trading and in February 2013 was sentenced to 2 years and 3 months jail time, to serve a minimum term of 15 months. According to the charges he admitted guilt to, in late 2006, while he was an executive at the advisory firm, Mr. Zhu instructed Mr. Yu to open a trading account with the online broker, CommSec, in the name of Mr. Fei’s mother, Ming Fei, in an attempt to hide his connection to the account. They bought financial products relating to Veda, making over $81,000 in profits, of which Mr. Zhu’s share was about $55,000.
Appearing before Sydney’s Downing Centre Local Court, Mr. Yu was not required to enter a plea today and the matter was adjourned to October 7, 2014.
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so how did he get caught?
and wasnt the family tie too distant to be considered insider trading?
@Jon – “family tie too distant”? Mr Zhu was in possession of privileged information which he was required by law to keep confidential, and has confessed that instead he passed it to Mr Fei rather than keeping it confidential. ASIC is now alleging that Mr Fei traded despite being aware that he had inside information. It sounds as though the mother isn’t being charged either because she didn’t profit from the account in her name, or because she, unlike her son, ASIC doesn’t allege that he was aware of wasn’t knowingly trading based on privileged information. How he got caught… Read more »
… sorry, bit garbled.
” or because she, unlike her son, isn’t alleged by ASIC to have been aware of the privileged information”
Yep its common practice for ASIC to ask the Share CFD brokers to provide their trades in a particular CFD during a takeover, sensitive news release etc
Ming Fei, a new novice trader, making incredibly accurate trades in a lightly traded Share CFD……
If I remember rightly – it’s been a while – on the LSE the regulator can see the order flow, and then write to brokers saying “Trade X happened on Y date; who’s your client?”, not “Have you had any trades on A between B and C?”