Hong Kong, which won a ruling that former Fidelity Management & Research Co. portfolio manager George Stairs sold shares of Chaoda Modern Agriculture Holdings Ltd. using inside information, isn’t seeking any penalty.
“We’re not recommending any disgorgement because under the law the losses avoided had to have been for personal gain,” Jonathan Kwan, a lawyer representing the government said after appearing before Hong Kong’s Market Misconduct Tribunal today.
A decision on whether to sanction Stairs by banning him from dealing in securities or corporate directorship in the city is entirely up to the tribunal, Kwan said.
The three-member Hong Kong tribunal, led by High Court Judge Michael Lunn, found in a ruling dated April 26 that Stairs received non-public information in June 2009 about a share placement from the Chinese vegetable producer’s Chairman Kwok Ho and Chief Financial Officer Andy Chan on a phone call and sold down his Chaoda holdings before the placement was announced. The tribunal said today it will rule on any sanctions for Stairs in due course.
Vincent Loporchio, a Boston-based spokesman for Fidelity, said before today’s hearing that the company disagrees with the Hong Kong tribunal’s conclusions regarding Stairs.
“He did not knowingly trade on non-public price sensitive information,” Loporchio said in an e-mailed statement. “Fidelity conducted a thorough internal review of this matter consistent with its strong protocols.”
No Personal Profit
Stairs, who remains an employee and is no longer managing assets on behalf of funds or clients, also didn’t trade personally in Chaoda or profit personally in any way, Loporchio said. The approximate loss avoided on behalf of shareholders was only 0.017 percent of the fund’s assets under management, he said.
Stairs netted HK$1.98 million for his funds by selling Chaoda shares ahead of the share placement announcement, according to a government notice.
“It was not a coincidence that, on the very day on which he had received material price sensitive information from Kwok Ho and Andy Chan, George Stairs placed an order to sell a parcel of those shares,” the tribunal wrote in April.
BlackRock Inc. employees who also participated in conference calls with Kwok and Chan in June 2009 reported the information to their compliance department “immediately” and were restricted from trading, the tribunal heard.
Ho and Chan didn’t break insider trading laws when they “deliberately and knowingly” divulged Chaoda’s plans to issue shares on investor calls, according to the tribunal’s ruling.
“Whatever were their purposes for disclosing the information to George Stairs, we are sure that it did not include the purpose that he use the information to deal in Chaoda shares,” the tribunal said.