By Chelsey Dulaney
Australia's Macquarie Group Ltd. will pay $15 million to settle
Securities and Exchange Commission charges related to its New
York-based brokerage unit's 2010 underwriting of a public offering
by China-based Puda Coal.
According to the SEC, Macquarie Capital was the lead underwriter
on Puda Coal's secondary offering and knew that some of its
materials contained false information. In 2012, the SEC charged
executives of Puda Coal with defrauding investors into believing
they were investing in a Chinese coal company when in fact they
were investing into an empty shell company.
Macquarie has also agreed to cover the costs of setting up a
fund to compensate investors who suffered losses after buying into
the offering. According to the SEC, Macquarie made $4.17 million as
underwriter.
"Macquarie takes its compliance and regulatory obligations very
seriously, and has worked closely with the SEC to provide relevant
information," a Macquarie spokesperson said. "Under the terms of
the settlement, Macquarie has neither admitted nor denied the SEC's
allegations."
According to the SEC, Puda Coal, which had traded on the New
York Stock Exchange, said in offering documents that it held a 90%
ownership stake in a Chinese coal company.
Macquarie repeated those statements in its own marketing
materials despite having received a diligence report that showed
Puda Coal didn't own any part of the coal company. According to
corporate filings in the People's Republic of China, Puda Coal's
chairman had transferred ownership of the company to himself and
then sold nearly half of his interest. As a result, Puda Coal no
longer had an ownership stake or source of revenue.
The SEC on Friday also charged former Macquarie Capital managing
director Aaron Black and investment banker William Fang for failing
to act after reading the report. Mr. Black agreed to pay $212,711
and Mr. Fang agreed to pay $35,000 to settle the charges, the SEC
said.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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