The SEC intends to file civil insider trading charges against Dow Jones Director David Li in connection with the Murdoch takeover bid, Dow Jones says. The SEC has sent Li a “Wells Notice”, which is the SEC’s way of saying “We’re pretty sure we’re going to sue you, so if you have anything to say in your defence, you’d better say it now.”
Li is the Chairman and CEO of Bank of East Asia, Ltd, and lives in Hong Kong. According to Dow Jones, Li often schmoozes with Hong Kong businessman Michael Leung Kai Hung. Two weeks before the Murdoch bid, Michael Leung Kai Hung transferred money to his daughter Charlotte and her husband, and they quickly flipped 415,000 shares of Dow Jones stock. The SEC charged Charlotte and her husband with insider trading two months ago, and a federal judge impounded their profits.
It sounds as though the SEC is now closing the loop, although it’s not clear what Li has done wrong. Passing on material non-public information is, in some cases, unethical, but it’s not against the law. What is against the law is trading on the information. Li denies breaking the law, but not, interestingly, tipping Mr. Hung. Sarah Ellison and Kara Scannell, Dow Jones