Insider trading earns ex-banker seven-year term


Sat, Sep 19, 2009 - Page 10

Former Morgan Stanley managing director Du Jun (杜軍) was sentenced to seven years in prison and fined HK$23.3 million (US$3 million) by a Hong Kong court for insider trading.

“I can’t think of another reason other than being driven by sheer greed for his action,” District Court Judge Andrew Chan (陳慶偉) said yesterday.

The sentence is the longest the court can hand out for insider trading in the city.

Du is the sixth person sent to jail in Hong Kong since April for insider trading, as the Securities and Futures Commission cracks down on the offense.

The commission has won convictions in all 10 cases it has brought since the city made insider dealing a crime in 2003.

Former BNP Paribas Peregrine Capital Ltd banker Ma Hon-yeung (馬漢揚) was jailed for 26 months in April. Ex-CLSA Asia-Pacific Markets banker Allen Lam (林嘉輝) and former HSZ (Hong Kong) Ltd fund manager Ryan Fong (方仁宏) were given prison terms in July.

Chan convicted Du, 40, last week of nine counts of insider trading and one count of advising his wife to deal in shares of Citic Resources Holdings Ltd (中信資源) in 2007.

“The defendant was given the opportunity twice to walk away by his supervisor who warned him of his action,” Chan said. “His action was a serious breach of trust.”

Du’s lawyer, Alexander King, declined to say whether he would appeal the sentence.

Du bought shares of Citic, a unit of China’s largest manager of government businesses, after learning of its plan to buy a Chinese oilfield while helping the company sell bonds.

He sold half of the shares in July 2007 for a profit of about HK$33.4 million after a May 8 announcement of a deal, prosecutor Charlotte Draycott had told the court.

He borrowed HK$50 million in margin financing from Morgan Stanley for the transactions, more than double his 2006 basic salary and bonus of HK$19 million, she said.

New York-based Morgan Stanley’s compliance system was “deficient,” Chan said on Sept. 10.

Du’s lawyer argued that the banker wouldn’t have sought and gained approval to trade the shares from the department had he known the information he gained while assisting the company in selling bonds was relevant.

“Morgan Stanley expects all of our employees to uphold the highest ethical standards,” Nick Footitt, a spokesman for the New York-based bank in Hong Kong, said on Sept. 10. Du’s misconduct “was identified by the firm and reported, and the employee was terminated,” he said.

“The wrongdoing by a former employee of our firm was a violation of Morgan Stanley’s values and policies,” he said.

A Beijing-native, Du worked for Morgan Stanley in Hong Kong from 2001 until May 2007 when he was fired. He returned to Beijing and returned to Hong Kong last year after HK$46.5 million of his assets in the territory were frozen by the SFC. He was arrested at the airport on his return.