U.S. News

Dow Jones Director David Li to Face SEC Charges: WSJ


The U.S. Securities and Exchange Commission plans to file civil charges against Dow Jones board member David Li over an insider trading probe linked to News Corp's bid for the media company, the Wall Street Journal reported on Wednesday.

Citing people familiar with the matter, the Journal reported the SEC had issued a Wells notice to Li, one of Hong Kong's most prominent businessmen. A Wells notice gives a company or individual a final chance to convince the SEC not to file charges. It would be the last step before the SEC files suit against Li.

The SEC had no comment on the Li report. Representatives for Dow Jones, which owns the Journal, and Li were not immediately available to comment.

"I have not heard of (a possible prosecution). I am not aware of the situation," Li told Hong Kong's Standard newspaper in its Thursday editions.

One of Asia's best-known bankers, Li is well-connected in both Hong Kong and mainland China.  He is chief executive of Bank of East Asia, a mid-tier Hong Kong lender, and holds a stake worth about US$178 million. Li is also a member of Hong Kong's Legislative Council and accustomed to rubbing elbows with prominent figures on the various boards on which he serves.

The report came at a critical moment for Dow Jones, which on Tuesday endorsed a $5 billion buyout offer from News Corp Chairman and Chief Executive Rupert Murdoch. The board's approval sends the deal to Dow Jones' controlling Bancroft family for final approval.

The SEC and the New York State attorney general have been looking into unusual trading in Dow Jones stock and options in the weeks before the company disclosed the $60 per share buyout offer from News Corp on May 1.

Securities market experts said the news was embarrassing for Li and Dow Jones, and reflects the SEC's stepped-up action against insider trading. "There is a real concern I think about non-U.S. persons taking advantage of U.S. capital markets for fraud," said Keir Gumbs, securities lawyer with Covington & Burling LLP.

Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, did not the probe would have a great impact on Murdoch's offer.

"Any time the SEC proceeds against a director, it's bad for the director and obviously embarrassing for the company," Elson said. "The timing isn't particularly good, but ... the transaction itself that's being recommended is really unaffected by this," he added, referring to the News Corp deal.

The SEC said on May 8 that a Hong Kong-based couple, Kan King Wong and Charlotte Ka On Wong Leung, "engaged in widespread and unlawful trading activity" that put them in a position to make an estimated $8.1 million profit on Dow Jones shares.

The Wall Street Journal reported in May that the SEC was expected to pursue a connection between the couple and Li. The paper said Li and Charlotte Leung's father, Michael Leung, share a history of business and social dealings. Michael Leung has not been charged in the case.

Li has denied disclosing information about the bid. In a Wall Street Journal report in May, he said: "I did not disclose to anyone, not even my wife, any information about Dow Jones." Dow Jones also said in May it was not investigating Li.

Li was born in London in March 1939 to one of Hong Kong's most prominent families. His grandfather founded Bank of East Asia in 1918 and the company now boasts one of the biggest branch networks in mainland China among Hong Kong lenders.

Li's brother, Arthur Li, was Hong Kong's secretary of education until last month. Their cousin, Andrew Li, is chief justice of Hong Kong's highest court.