http://www.theaustralian.com.au/business/markets/hanlong-mining-p...

http://www.theaustralian.com.au/business/markets/hanlong-mining-probe-provides-insights-into-asics-inner-workings/story-e6frg916-1226139331350

JUST over a year ago the corporate regulator became responsible for handling market oversight and surveillance. A new "listed markets surveillance team" was established within the Australian Securities & Investments Commission, dedicated to monitoring real-time trading.

In July this new team observed an unusually high number of trades in contracts for difference relating to two resources companies, Sundance Resources and Bannerman Resources.

This trading was followed by announcements by both companies that they were the subject of takeover offers by Hanlong Mining. ASIC officers swung into action and within days an investigation was officially launched.

Despite its early stages, the insider trading probe hit the headlines this week when it emerged that three Hanlong executives had been stood down pending the outcome of ASIC's investigation.

An affidavit filed by an ASIC lawyer reveals that in late July Hanlong responded to ASIC queries about its proposed takeover for Bannerman, including listing the employees who worked on the deal.

The insight into ASIC's inner workings was revealed in an affidavit made public this week as part of a court hearing about whether Hanlong managing director Steven Hui Xiao, one of those under investigation, could make a short trip to Hong Kong to attend to a visa application.

A NSW Supreme Court judge agreed, and ASIC also released a statement about the action it had taken in relation to obtaining travel banning orders against Hanlong executives Mr Xiao, Calvin Zhu and Fan Zheng. The trio, along with Mr Xiao's wife Xike Hu and another women, FanFan Chen, are also subject to asset freezing orders.

Meanwhile, Hanlong's parent company, the Chinese-based Sichuan Hanlong Group, flew out its vice-president, Kang Huan Jun, to take the helm and assure investors that Hanlong's plans were still on track. The company is not under any investigation.

Next week there will be a further hearing into the matter, when a judge will have to decide if an extension of freezing orders and travel restrictions should be extended -- they are due to expire at 5pm on Thursday.

The trades netted close to $2 million in profit, according to ASIC, but whether it will pursue a criminal or civil case against one or all of the group is still unclear.

No charges have been laid and both ASIC and the court have emphasised that the investigation is just that -- and is in its early stages. Whether ASIC ultimately pursues civil or criminal action is yet to be seen -- it can choose to take either route.

Speaking last year, ASIC's former chairman Tony D'Aloisio spoke about insider trading and market manipulation. "ASIC's approach in more recent times has been (generally) to pursue criminal proceedings for these offences," he told a Supreme Court of Victoria conference in Melbourne. "Although preparation for such cases takes longer (necessarily so with a higher standard of proof and when individual freedom is at issue), ASIC's view is that criminal proceedings and sanctions, including imprisonment, are what will 'focus the minds' of those who may be inclined to stray (so-called 'general deterrence')."

Since taking over markets supervision, ASIC's surveillance unit has referred 29 trading matters to its deterrence division, according to the latest available figures. Of those, three have involved CFD trading, which is an ongoing focus for ASIC.

Earlier this year ASIC chairman Greg Medcraft put the CFD industry on notice that it would be monitoring their businesses to ensure they met new guidelines.

Sundance's share price recovered yesterday, closing at 45.5c. It had fallen to 35.5c on Tuesday. Bannerman's share price also suffered amid concerns the planned takeover by Hanlong might not go ahead. It closed at 32.5c yesterday.