Macquarie to pay U.S. SEC $15 mln over China stock sale
(Adds details of allegations, comments, byline)
By Jonathan Stempel
March 27 (Reuters) - A unit of Australia's Macquarie Group Ltd will pay $15 million to settle U.S. Securities and Exchange Commission charges that it misled investors who bought shares of China's Puda Coal Inc in an offering it underwrote.
Friday's settlement resolves charges that New York-based Macquarie Capital (USA) Inc approved marketing materials for the $108 million offering in December 2010 despite knowing it falsely represented that Puda owned 90 percent of a Chinese coal miner.
The SEC said Macquarie did not act on a due diligence report that showed Puda Chairman Ming Zhao had transferred that stake to himself, and then sold part of it to state-owned CITIC Group.
While Macquarie made $4.17 million from its underwriting, the SEC said investors who bought Puda shares suffered losses after the transfers were revealed.
Puda is no longer in business. In February 2012 the SEC charged Zhao and former Puda Chief Executive Liping Zhu with fraud.
"Underwriters are critical gatekeepers who are relied upon by the investing public to ferret out the essential facts and address potential inaccuracies before marketing a public stock offering," Andrew Calamari, director of the SEC office in New York, said in a statement.
Former Macquarie managing director Aaron Black, 40, of New South Wales, and investment banking associate William Fang, 31, of New York, settled related charges that they failed to exercise appropriate care.
The SEC said Fang had read the due diligence report but told colleagues in an email that "no red flags were identified," while Black had read enough of the report to know that Puda did not own the 90 percent stake, but did nothing.
Black agreed to pay $212,711 and to a five-year ban from supervisory roles in the securities industry, while Fang agreed to pay $35,000 and to a five-year securities industry ban. The SEC said Black is now a Macquarie division director in Sydney.
None of the defendants admitted wrongdoing.
"Macquarie takes its compliance and regulatory obligations very seriously and has worked closely with the SEC to provide relevant information," a Macquarie spokesman said in a statement.
Lawyers for Black and Fang were not immediately available for comment.
Puda stock recently traded at one-tenth of one cent.
(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama; and Peter Galloway)
