The SEC alleged that Well Advantage had stockpiled shares of Nexen, based on confidential information that CNOOC was about to announce an acquisition of Nexen.
The U.S. Securities and Exchange Commission said Thursday a Hong Kong-based firm, charged with insider trading in July, 2012, has agreed to settle the case by paying more than $14 million.
News of the settlement comes after the SEC filed an emergency action against Well Advantage to freeze its assets less than 24 hours after the firm placed an order to liquidate its entire position in Nexen Inc. (TSX: T.NXY, Stock Forum) (NYSE: NXY, Stock Forum). Nexen is the Calgary-based target of a $15.1 billion takeover by the Chinese National Offshore Oil Company CNOOC Ltd. (NYSE: CEO, Stock Forum).
The SEC alleged that Well Advantage had stockpiled shares of Nexen, based on confidential information that CNOOC was about to announce an acquisition of the Canadian company.
On July 23, 2012, CNOOC announced that it had reached a definitive agreement to acquire Nexen in an all-cash deal worth US$27.50 a share.
Well Advantage sold those shares for more than $7 million in illicit profits, immediately after the deal was publicly announced, the SEC said.
Well Advantage is controlled by a prominent Hong Kong businessman Zhang Zhi Rong, who also controls another company that has a “strategic cooperation agreement” with CNOOC, the SEC has disclosed.
The proposed settlement, announced Thursday, October 18, is subject to the approval of Judge Richard J. Sullivan of the U.S. District Court for the Southern District of New York.
“If approved by the court, Well Advantage has agreed to give up all of its illicit profits from these trades and pay a substantial penalty on top of that,’’ said Sanjay Wadhwa, Deputy Chief of SEC Enforcement Division’s Market Abuse Unit and Associate Director of the New York Regional Office.
“The speedy resolution of this case shows the serious consequences that await traders who engage in insider trading,’’ he said.
The SEC said Well Advantage has agreed to the entry of a final judgement requiring payment of $7.1 million in illegal profits made from trading Nexen stock, and a payment of $7.12 million penalty.
Nexen is a global oil and gas firm with 3,000 employees on the payroll and operations in the Alberta oil sands, the United Kingdom North Sea, the Gulf of Mexico and elsewhere.
Trading at $25.40 on Thursday, the company has a market cap of $13.5 billion, based on 530 million shares outstanding. The 52-week range is $26.70 and $14.20.
Nexen shareholders approved the plan of arrangement with CNOOC on September 20, 2012. However the transaction is still subject to approval by the Canadian government, which has extended its review of the deal until mid-November.