Adviser Charged with Front Running

June 16, 2014

The SEC brought an enforcement action against Siming Yang, alleging that Yang engaged in a fraudulent front-running scheme whereby he sought to personally profit in connection with purchasing securities issued by Zhongpin Inc.

From 2008 until March 30, 2012, Yang, a Chinese citizen and a resident of New York, was employed as a research analyst with a New York-based registered broker-dealer and investment adviser, BAMCO, Inc. (BAMCO). The SEC stated that Yang purchased Zhongpin securities in his joint personal account when he knew that he would soon complete massive, market moving purchases of Zhongpin stock on behalf of his own start-up investment firm, Prestige Trade Investments Limited. The SEC alleged that while still employed with BAMCO, Yang secretly created Prestige and acted as the firm’s investment adviser. Yang was responsible for creating Prestige’s investment strategy and directed all trades on Prestige’s behalf. Between March 15 and March 21, 2012, Yang used $29.8 million of Prestige’s funds to purchase over 3 million shares of Zhongpin stock. On March 14, prior to Prestige’s purchases, Yang purchased 50,000 shares of Zhongpin stock and 1,978 Zhongpin call options in his personal brokerage account.

The SEC also alleged that on April 2, 2012, Yang caused Prestige to file a Schedule 13D and later an amended Schedule 13D disclosing Prestige’s acquisition of Zhongpin stock. According to the SEC, Yang failed to disclose in either Schedule 13D his purchases of Zhongpin securities in his personal account. The SEC stated that Yang knew or recklessly disregarded that the Schedules 13D contained material misrepresentations and omissions regarding Yang’s personal transactions in Zhongpin securities. Click here to access the administrative action.


Investment Advisers