Australias financial regulator has been investigating misues of highly leveraged financial trading instruemnts in a potenial takeover bid.
THE head of a Chinese firm, his wife and three others are being investigated over claims they used inside knowledge of the group's plans to take over Australian mining companies to make almost $2 million in profits betting on the sharemarket.
The Australian Securities & Investments Commission has successfully frozen the assets of the five, who include Hanlong Mining Investments managing director Steven Hui Xiao, and it has imposed travel bans ahead of a hearing in the NSW Supreme Court next week.
ASIC sought the action while it investigates what it believes is insider trading related to the shares of two Australian companies - Bannerman Resources and Sundance Resources - before they were the subject of takeover bids by Hanlong worth a combined $1.4 billion in July.
ASIC believes the three men and two women used contracts for difference, which are financial instruments that allow investors to bet on stock price movements without having to buy the physical shares.
The markets surveillance team at ASIC picked up the unusually large number of CFD trades relating to Sundance and Bannerman in July, with the $144m Bannerman deal announced on July 11 and the $1.4bn Sundance takeover one week later, on July 18.
CFDs are controversial because they are considered "extremely risky" by ASIC, which recently issued new guidelines for companies that issue the products.
CFDs have been banned in several European countries, most recently in France, Italy, Spain and Belgium.
ASIC launched its investigation into CFD trading in Sundance and Bannerman in late July, and obtained information from various companies, including CFD traders IG Index and CMC Markets Asia Pacific and banks.
