Macquarie to pay U.S. SEC $15 mln over China stock sale (updated)
27/03/2015 16:11
(Adds details of allegations, comments, byline)
By Jonathan Stempel
March 27 (Reuters) - A unit of Australia's Macquarie Group
Ltd MQG.AX will pay $15 million to settle U.S. Securities and
Exchange Commission charges that it misled investors who bought
shares of China's Puda Coal Inc PUDA.PK in an offering it
underwrote.
Friday's settlement resolves charges that New York-based
Macquarie Capital (USA) Inc approved marketing materials for the
$108 million offering in December 2010 despite knowing it
falsely represented that Puda owned 90 percent of a Chinese coal
miner.
The SEC said Macquarie did not act on a due diligence report
that showed Puda Chairman Ming Zhao had transferred that stake
to himself, and then sold part of it to state-owned CITIC Group.
While Macquarie made $4.17 million from its underwriting,
the SEC said investors who bought Puda shares suffered losses
after the transfers were revealed.
Puda is no longer in business. In February 2012 the SEC
charged Zhao and former Puda Chief Executive Liping Zhu with
fraud.
"Underwriters are critical gatekeepers who are relied upon
by the investing public to ferret out the essential facts and
address potential inaccuracies before marketing a public stock
offering," Andrew Calamari, director of the SEC office in New
York, said in a statement.
Former Macquarie managing director Aaron Black, 40, of New
South Wales, and investment banking associate William Fang, 31,
of New York, settled related charges that they failed to
exercise appropriate care.
The SEC said Fang had read the due diligence report but told
colleagues in an email that "no red flags were identified,"
while Black had read enough of the report to know that Puda did
not own the 90 percent stake, but did nothing.
Black agreed to pay $212,711 and to a five-year ban from
supervisory roles in the securities industry, while Fang agreed
to pay $35,000 and to a five-year securities industry ban. The
SEC said Black is now a Macquarie division director in Sydney.
None of the defendants admitted wrongdoing.
"Macquarie takes its compliance and regulatory obligations
very seriously and has worked closely with the SEC to provide
relevant information," a Macquarie spokesman said in a
statement.
Lawyers for Black and Fang were not immediately available
for comment.
Puda stock recently traded at one-tenth of one cent.
(Reporting by Jonathan Stempel in New York; Editing by Chizu
Nomiyama; and Peter Galloway)
((jon.stempel@thomsonreuters.com;)(646 223-6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))
Keywords: SEC MACQUARIE/CHARGES