A former Morgan Stanley banker convicted of insider trading will have to pay more than 290 investors a total of HK$23.9 million ($3.08 million) they lost out on, a Hong Kong court ordered on Thursday, in an unprecedented legal ruling.
Du Jun, a former banker for Morgan Stanley Asia Limited, was ordered by Hong Kong's Court of First Instance to make the payment for using inside information when he traded shares in CITIC Resources Holdings Ltd <1205.HK> in 2007.
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The case marks the first time in Hong Kong that the Securities and Futures Commission (SFC) has successfully managed to win a court order forcing an individual insider trader to pay investors money they lost out on as a result of trading with him or her.
It also contrasts with the approach taken by most other regulators, including the United States and Britain, which tend to levy fines for insider trading that go into government coffers rather than returning money to investors.
"The investors had no means to detect they were dealing with Du, who was engaged in illegal insider dealing," the SFC's enforcement head Mark Steward said in a statement.
"This case sends a clear message that the consequences of wrongdoing, including the costs of restoration or remediation, should be met by wrongdoers and not be borne by innocent investors or the market," he added.
A spokesman for Morgan Stanley in Hong Kong declined to comment on the matter.
Du was convicted in 2009 of insider trading and sentenced to seven years in jail. The term was reduced to six years in 2012 following an appeal, though it still marks the longest sentence ever given in Hong Kong for the offence.
This case, heard in the civil courts, was only resolved now following the end of criminal proceedings against Du.
Du had been part of the Morgan Stanley team advising CITIC Resources on a proposed deal to buy oil field assets in China when he traded in their shares.
The HK$23.9 million represents the difference between the price at which the affected investors sold shares in CITIC Resources to Du and the price at which they could have sold the shares had the price sensitive information related to the deal been known by the market at the time.
($1 = 7.7543 Hong Kong dollars)
(Reporting by Rachel Armstrong; Additional reporting by Lawrence White in Hong Kong; Editing by Jeremy Laurence)