Former Calgary energy exec slapped by Alberta securities watchdog for trades ahead of Nexen-CNOOC deal

Former Calgary energy exec slapped by Alberta securities watchdog for trades ahead of Nexen-CNOOC deal

A former Calgary energy executive has been penalized by the Alberta Securities Commission (ASC) following a ruling by U.S. authorities that he violated insider trading laws.

Last September, the U.S. Securities and Exchange Commission (SEC) ruled that Fengjiu Zhang breached the U.S. Exchange Act with respect of securities of Calgary-based Nexen Inc. prior to the announcement in 2012 that the company was about to be bought by the Chinese energy firm CNOOC Ltd.

At the time of the violations, Zhang was president and chief executive officer of CNOOC's Calgary-based Canadian subsidiary, CNOOC Canada Inc.

"Through that position, and prior to the announcement, he knew about the negotiations between Nexen and CNOOC and their status," the decision says.

In its decision to "reciprocate," or match, a portion of the U.S. sanctions, the ASC notes that the SEC found that less "than a week before the announcement," Zhang contacted a friend living in the United States and asked her to buy Nexen securities on his behalf. She did so, then sold the securities following the announcement for a profit of $65,769 US.

Zhang tipped off another friend, his co-respondent in the SEC proceedings. That person purchased Nexen securities on "the last trading day before the announcement," and sold them shortly after the announcement for a profit of $11,493.23 US.

Zhang entered into a settlement agreement with the SEC but neither admitted nor denied its allegations against him, the ASC says. The SEC sanctions against Zhang included a cease-and-desist order, a monetary penalty, a disgorgement order, and a three-year ban on being a director or officer of a company.

"We are … satisfied that reciprocation of the SEC order would serve the public interest … The misconduct described in the SEC Order would have constituted contraventions of insider trading and tipping provisions in the [Alberta Securities] Act, which serve to protect investors and the integrity of the Alberta capital market," the ASC panel said in its decision.

The panel ordered that  Zhang must resign all positions that he holds as a director or officer of any reporting issuer and that he be prohibited from becoming or acting as a director or officer (or both) of any reporting issuer until Sept. 28, 2020.

Zhang moved back to his native China in 2017. He did not attend the ASC hearing, but his lawyer told the commission's panel that Zhang was not opposed to the sanctions.

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