WASHINGTON-The Securities and Exchange Commission is continuing its investigation of alleged insider trading of Omnipoint Corp. stock prior to the announcement that VoiceStream Wireless Corp. is buying Omnipoint.
On July 26, the ongoing investigation resulted in a Hong Kong investor, Samson Hui, agreeing to pay more than $2 million in fines. Hui did not admit he had engaged in insider trading and is not cooperating with the continuing investigation, said Paul Gerlach, associate director of the SEC’s division of enforcement.
Gerlach would not indicate whether the SEC is focusing its investigation on other Hong Kong residents or Americans.
Omnipoint would not comment on the SEC’s investigation. Repeated calls to VoiceStream were not returned.
Hui and a Hong Kong company he partially owns, Rich Leader Enterprises Ltd., purchased 121,000 shares of Omnipoint stock on June 21 and June 22. Hui paid between $19.13 to $21.63 per share for the stock.
On June 23, VoiceStream announced it was purchasing Omnipoint for $4.9 billion. Following the announcement, Omnipoint’s stock rose to $29.
Hui’s payment represents trading profits he made, plus an agreed-to fine.
Gerlach said the investigation is continuing into others that may have engaged in insider trading, plus those who tipped off Hui about the impending transaction.
The Hong Kong connection stems from two facts. One, according to Gerlach, is that Hong Kong residents serve on the board of directors for VoiceStream. Secondly, Hutchison Telecommunications PCS Ltd. has agreed to invest $957 million into the merged Voice-Stream/Omnipoint entity. Hutchison Telecommunications PCS is an indirect subsidiary of Hutchison Whampoa, which is based in Hong Kong.
The complaint did not allege a connection between Hui and Hutchison.
The SEC had to work fast to preclude Hui from completing any sales transaction even though Hui had not indicated he was preparing to sell his Omnipoint stock, Gerlach said. The SEC’s concern was that if Hui had put in a sell order, the agency would have had to go into court to freeze the transaction before the three-day settlement period expired.
Similar frenzied activity is not necessary when the SEC investigates U.S. investors because it is assumed the SEC has jurisdiction over at least some of a U.S. investor’s assets. The SEC does not have jurisdiction over foreign assets.
