Eight arrested in ICAC–SFC operation over insider trading scheme

Hong Kong’s anti-graft watchdog and market regulator have arrested eight people in a joint operation targeting suspected insider trading and corruption involving confidential placing information of listed companies.

The Independent Commission Against Corruption (ICAC) and the Securities and Futures Commission (SFC) said on Thursday that they conducted a joint enforcement operation, codenamed “Fuse,” on March 10 and 11.

A total of six men and two women aged between 35 and 60 were arrested. Those detained include senior management personnel from two licensed securities firms and a licensed hedge fund management company, as well as an intermediary.

During the operation, investigators from both agencies searched 14 locations, including the offices of the licensed corporations involved and the residences of the arrested individuals.

According to the ICAC, senior executives from three licensed corporations — two securities firms and one hedge fund management company — are under investigation in the case.

Authorities suspect that a senior executive at one of the licensed securities firms accepted bribes totaling more than HK$4 million from the licensed hedge fund management company. In return, the executive allegedly leaked confidential information about planned share placings of several Hong Kong-listed companies before the information was publicly disclosed.

Armed with the insider information, the hedge fund is suspected of short-selling the relevant stocks or entering into short-selling swap contracts to build bearish positions in the market.

After the share placing announcements were made public and the stock prices fell, the hedge fund allegedly generated profits of about HK$315 million from its short positions.

The joint operation stemmed from an initial SFC investigation into suspected insider trading activities, which uncovered possible corruption elements.

The case was subsequently referred to the ICAC to investigate suspected corruption offences, while the SFC continues to examine potential insider trading and other misconduct under the Securities and Futures Ordinance.

Both agencies said the investigation is ongoing and declined to provide further comment.