An Emirati man has been sued and had his assets frozen by the US Securities and Exchange Commission (SEC) over alleged insider trading before a major energy deal in February.
The SEC suit, filed in the US district court in New York late on Monday, alleged that Khaled Mohammed Sharif al Sayed al Hashemi bought 120,000 shares in Nova Chemicals in the weeks before the company was acquired by the International Petroleum Investment Company (IPIC).
Mr al Hashemi, a UAE national who lives in Abu Dhabi, is alleged to have made US$458,760 (Dh1.6 million) in illegal profits stemming from the deal with IPIC, a firm based in Abu Dhabi that invests in foreign petrochemical assets.
The SEC complaint alleges he made the gains by buying shares in Nova, a Pittsburgh, Pennsylvania-based maker of plastics and other petrochemical products, in the two weeks before the $2.3 billion IPIC acquisition was announced on Feb 23.
When news of the acquisition came out, shares in Nova rose by 289 per cent to $5.21 in a single day of trading in New York, where the company was listed.
That left Mr al Hashemi with a fair profit when he sold his whole stake just after the merger news, the SEC alleges.
Making trades based on merger and acquisition deals that have yet to be announced is illegal in the US. It can carry stiff fines and even prison terms, as was the case in 2004 when Martha Stewart, a popular American TV personality, was sentenced to five months in jail for selling shares of the drug maker ImClone based on inside information.
Insider trading is also illegal in most jurisdictions in the Middle East, including the UAE. While the SEC's complaint did not reveal many details about the SEC's investigation of Mr al Hashemi, it said he bought 120,000 Nova shares using his online brokerage account.
"These purchases began to accelerate as the merger date approached, as he made 54 per cent of his total purchases on the last trading day before the announcement," the SEC release said.
"Hashemi funded these purchases by liquidating nearly 80 per cent of the value of his stock portfolio and by wiring approximately $100,000 into his trading account."
Mr al Hashemi then placed "limit orders", or directions to automatically sell shares when they rose above a predetermined price, according to the SEC complaint. When the Nova stock skyrocketed, the orders went into effect and his entire stake was sold.
After its filing, the SEC was granted a restraining order freezing Mr al Hashemi's assets. Attempts to reach him yesterday were unsuccessful.
Mr al Hashemi's case is the second example in a week of the SEC taking action against Gulf individuals. Late last week, the SEC launched an investigation into Hazem Khalid al Braikan, a Kuwaiti businessman who was accused of planting fake news stories about acquisitions of two US companies by Gulf investors.
Mr al Braikan was found dead last weekend in an apparent suicide.
Both cases have highlighted a lack of regulatory oversight of markets in the Gulf. While the SEC takes a tough stance towards share manipulation and insider trading, a history of lax regulation has engendered a culture in which many experts say it is possible to get away with the kinds of infractions that Mr al Braikan and Mr al Hashemi have been accused of.
Despite legal structures covering insider trading, most regulators in the Gulf do not actively pursue such cases, according to Robert McKinnon, the head of research at Al Mal Capital in Dubai.
While the SEC employs complex algorithms to track the trading of the family and friends of people involved in mergers and acquisitions to root out any illegal activity, regulators in the Gulf typically rely on tipoffs before starting investigations.
"I don't think it's culturally accepted in any market, but wherever people have an opportunity, whether it is because of weak regulations or lax discipline in terms of Chinese walls and lax enforcement, you can have problems like these," Mr McKinnon said.
But even under the SEC's tough regulatory standards, the allegations against Mr al Hashemi may be difficult to prove. To successfully prosecute its case, the commission must document that Mr al Hashemi's purchase was not just a lucky strike, or a very smart move.
@Email:afitch@thenational.ae
The Limehouse Golem
Director: Juan Carlos Medina
Cast: Olivia Cooke, Bill Nighy, Douglas Booth
Three stars
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
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2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
The specs
Engine: 5.2-litre twin-turbo V12
Transmission: eight-speed automatic
Power: 715bhp
Torque: 900Nm
Price: Dh1,289,376
On sale: now
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
Mane points for safe home colouring
- Natural and grey hair takes colour differently than chemically treated hair
- Taking hair from a dark to a light colour should involve a slow transition through warmer stages of colour
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
THE SPECS
Aston Martin Rapide AMR
Engine: 6.0-litre V12
Transmission: Touchtronic III eight-speed automatic
Power: 595bhp
Torque: 630Nm
Price: Dh999,563
THREE
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As You Were
Liam Gallagher
(Warner Bros)
UAE%20Warriors%2033%20Results
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NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
The specs
Price, base / as tested Dh1,100,000 (est)
Engine 5.2-litre V10
Gearbox seven-speed dual clutch
Power 630bhp @ 8,000rpm
Torque 600Nm @ 6,500rpm
Fuel economy, combined 15.7L / 100km (est)
The team
Photographer: Mateusz Stefanowski at Art Factory
Videographer: Jear Valasquez
Fashion director: Sarah Maisey
Make-up: Gulum Erzincan at Art Factory
Model: Randa at Art Factory Videographer’s assistant: Zanong Magat
Photographer’s assistant: Sophia Shlykova
With thanks to Jubail Mangrove Park, Jubail Island, Abu Dhabi
Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
