A former Morgan Stanley managing director has been arrested and charged in Hong Kong with insider dealing linked to trades in CITIC Resources Holdings Ltd, the territory's financial regulatory body said.
Du Jun was detained at the Hong Kong International Airport on Thursday after arriving from Beijing and appeared in court on Friday, Hong Kong's Securities and Futures Commission (SFC) said in a statement on its website. The regulator said no plea was taken and the case was adjourned to September 5, with Du granted bail and ordered to surrender all travel documents.
The SFC said the charges allege that on nine occasions between February 15 and April 30 last year, Du dealt in CITIC Resources shares while in possession of material and price sensitive information not known to the market. The regulator said it is alleged Du obtained the information, involving a proposed deal announced on May 9, 2007, while part of a Morgan Stanley team involved in advising CITIC Resources.
"The charges relate to a total of 26.7 million shares in CITIC Resources allegedly acquired by Du at a cost of about HK$86 million ($11.02 million)," the statement said. "On 30 April 2007, the last day Du was alleged to have bought CITIC Resources shares, the share price of CITIC Resources closed at HK$3.68. The price rose by 13.86 percent to HK$4.19 on the day of the announcement."
The SFC said Du is also alleged to have counselled or procured his wife Li Xin, who is not facing any charges, to deal in CITIC Resources shares on February 27. Du and his wife could not immediately be reached for comment. The SFC statement said Du, who had been residing mainly in Beijing since last year, no longer works for Morgan Stanley. It said the US investment bank reported Du's trading to the SFC in May of last year and co-operated fully with the investigation.
"The alleged wrongdoing by a former employee of our firm is an egregious violation of Morgan Stanley's values and policies. This conduct was identified by the firms own compliance systems and reported to the SFC in May 2007," a Morgan Stanley spokeswoman said in an e-mailed statement.
"Morgan Stanley expects all of our employees to uphold the highest ethical standards. We will continue to provide any assistance sought by the authorities in its prosecution of those who take personal advantage of the trust of our clients and the firm."