Tuesday, January 25, 2005
The SEC issued a Litigation Release (Jan. 25) discussing the settlement of a civil injunctive action for insider trading by Jun Singo Liang, a Chinese citizen who does not reside in the United States. Liang is a senior vice president and general manager of the Wireless Business Department for NetEase.Com, a Beijing-based company with an office in California whose shares are traded as American Depository Receipts on NASDAQ. The complaint alleges that prior to a public announcement that Liang's division, NetEase's largest, had suffered a significant revenue shortfall, he "sold more than 47,000 shares of NetEase stock * * *, realizing over $3 million in sales proceeds. After NetEase announced the revenue shortfall, the stock price plummeted by 23%. By trading ahead of this news, Liang avoided more than $700,000 in losses." Liang agreed to pay disgorgement and prejudgment interest totaling $731,169, a civil penalty of $355,129, and a five-year director-and-officer bar.
The Commission's Release notes that Liang's penalty is lower than the usual one-times trading profit sought from defendants because he voluntarily disclosed his trading to the company and the SEC. The civil action shows once again the scope of the SEC's jurisdiction to reach trading by those outside the United States when the securities are traded on an American market. (ph)