SEC to Charge Dow Jones Board Member

As Rupert Murdoch's News Corp gets closer to acquiring Dow Jones, the SEC plans to bring more insider trading charges related to the deal.
Stephen TaubJuly 18, 2007

The Securities and Exchange Commission’s insider trading case connected with News Corp.’s takeover offer of Dow Jones could claim another victim.

The regulator has sent a Wells notice to Dow Jones board director David Li, chairman and chief executive of Bank of East Asia Ltd., indicating it plans to recommend filing civil charges against him, according to the Wall Street Journal, which cited people familiar with the matter.

The disclosure came the day after Dow Jones & Co. said its board had approved the $5-billion offer from News Corp. The Bancroft family, which through its supervoting shares has a 64-percent voting stake in Dow Jones, publisher of the Journal and other publications, will meet in Boston on Monday to consider the offer, according to the newspaper.

Back in May, the SEC filed charges against a Hong Kong couple who allegedly engaged in illegal insider trading before the public announcement of the bid for Dow Jones by News Corp., which is controled by Rupert Murdoch.

The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, maintained that Kan King Wong and Charlotte Ka On Wong Leung had a Merrill Lynch account in Hong Kong containing just 2,500 shares of another company, worth $53,750, when they acquired material, nonpublic information regarding Murdoch’s $5 billion offer.

According to the SEC, Leung’s father wired $3.18 million from a bank in Brussels to their Merrill Lynch account, and the couple took out $4.5 million in loans, allowing them to purchase 415,000 shares of Dow Jones stock between April 13 and April 30. On May 1, following the announcement of the takeover offer — which priced Dow Jones at $60 per share — the company’s share price rose from $37.12 to $57.28. On May 4, charged the SEC, Kan Wong issued an order to sell the shares, for a profit of about $8.1 million.

At the time, Dow Jones stated that it had received subpoenas from the New York attorney general’s office for information related to trading in its stock and options.

The Wall Street Journal said Li was identified early on as a person of interest. He is connected through business and social relationships to a family member of the Hong Kong couple, the Journal reported.

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