By Debra Mao and Michelle Yun - Apr 30, 2012 7:01 AM ET
Former Fidelity Management & Research Co. portfolio manager George Stairs was “culpable” of trading shares in Chaoda Modern Agriculture Holdings Ltd. (682) on inside information, a Hong Kong tribunal ruled.
Chaoda Chairman Kwok Ho and chief financial officer Andy Chan didn’t engage in insider trading before a planned share placement by the Chinese vegetable producer, according to the 135-page ruling by Hong Kong’s Market Misconduct Tribunal.
“It was not a coincidence that, on the very day on which he had received material price sensitive information from Mr Kwok Ho and Mr Andy Chan in respect of Chaoda, Mr George Stairs placed an order to sell a parcel of those shares,” the tribunal wrote in its report, noting that other investors, including analysts at BlackRock Inc. (BLK), notified their compliance departments about the share-sale information.
The three-member tribunal, led by High Court Judge Michael Lunn, held hearings in February and March to investigate whether material, non-public information was improperly disclosed on phone calls involving Kwok, Chan and U.S. institutional investors in 2009. Stairs took part in one of those calls and sold some of his Chaoda holdings ahead of the placement, according to Hong Kong’s government.
Rowena Kwok, a spokeswoman for Fidelity, didn’t immediately reply to an e-mail request for comment. Stairs had told the tribunal he believed the share-placement information he was given was public. Fidelity said in February it believed he didn’t violate any laws or regulations.
Selling Then Buying
Stairs netted HK$1.98 million ($255,000) for his funds by selling Chaoda shares ahead of the announcement. He later bought more, at a lower price, in the share offering, according to a government notice.
The civil tribunal inquiring into the allegations has the power to disgorge profits made or losses avoided. It can also ban individuals from dealing in any securities, and from serving as a director or manager of a corporation. A hearing will be held on May 22 to determine Stairs’ penalty, according to Jonathan Kwan, a lawyer representing the government.
The ruling, dated April 26, was posted on the tribunal’s website.
Simon Shi, a spokesman at Chaoda, wasn’t available when a phone call was made to the company’s investor relations office.
To contact the reporters on this story: Debra Mao in Hong Kong at dmao5@bloomberg.net; Michelle Yun in Hong Kong at myun11@bloomberg.net
To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net
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