Sydney man Fei Yu has been convicted by Justice Armitage of the NSW District Court after pleading guilty to one rolled up charge of insider trading and formally admitting a second insider trading offence that was taken into account by the Court.
Mr Yu was released on recognizance subject to the condition that he be of good behaviour for a period of 12 months and pay a pecuniary penalty in the amount of $10,000. In addition, Mr Yu undertook to pay the net profits from his offending ($17,527) to a charitable foundation and he will also be automatically disqualified from managing a corporation for 5 years.
Mr Yu admitted procuring the acquisition of shares and contracts for difference (CFDs) in Veda Advantage Limited (Veda) in January 2007 while he possessed inside information about a proposed takeover of Veda by Pacific Equity Partners. The accounts used to acquire the shares and CFDs were held in the name of Mr Yu’s mother and an associate.
Mr Yu received the inside information from a close friend, Mr Bo Shi Zhu, who was an executive in the corporate finance advisory division of Caliburn Partnership Pty Ltd (now Greenhill & Co, Inc) who were advising Veda regarding the proposed takeover. Greenhill & Co co-operated with ASIC throughout the investigation.
Overall, Mr Yu invested $34,795 in Veda shares and CFDs and made a gross profit of $20,567 from the trades.
ASIC Commissioner Cathie Armour said "ASIC is focused on deterring insider trading conduct wherever it occurs. Every prosecution is another important step in promoting confidence in the integrity of Australia's financial markets."
The Commonwealth Director of Public Prosecutions prosecuted the matter.
Background
On 12 August 2014, Mr Yu appeared before court initially charged with eight individual counts of insider trading, following an ASIC investigation (refer: 14-197MR).
The alleged insider trading was identified by ASIC’s market surveillance team and referred to ASIC’s markets enforcement team for investigation and enforcement action.
The maximum penalty for the alleged offence at the time it was committed was 5 years jail and/or a fine of $220,000. For offences committed on or after 13 December 2010, the maximum penalty increased to 10 years jail or a fine of $495,000, or both.
Mr Yu is the third person convicted of insider trading offences following ASIC's investigation relating to officers of Hanlong Mining Investment Pty Ltd, although Mr Yu had no direct association with this company. In February 2013, Mr Bo Shi Zhu Zhu was convicted of insider trading relating to Mr Yu, plus additional offences, and sentenced to imprisonment for 2 years and 3 months (refer: 13-027MR). In March 2016, following his extradition from Hong Kong after fleeing Australia, Mr Hui Xiao was convicted and sentenced to imprisonment for 8 years and 3 months (refer: 16-070MR)