According to a reporter from Securities Daily, as of August 4, the China Securities Regulatory Commission had issued 123 administrative penalty decisions during the year, 23 of which involved maximum penalties, mainly focusing on letter disclosure violations. Judging from the amount of fines and confiscations, 6 fines involved more than 10 million yuan, mainly concentrated in insider trading cases, with the highest fine reaching 3.625 billion yuan.
Market participants believe that more large fines applicable to the new securities law may gradually appear in the second half of this year, and the securities class action system with Chinese characteristics has been activated, and civil liability will be intensified. The Criminal Law Amendment (Draft) is currently soliciting opinions. The multi-dimensional administrative, civil, and criminal liability will significantly increase the cost of illegal activities in the capital market.
Disclosure violations and insider trading are the focus of penalties
Since the beginning of this year, the capital market has been the focus of many meetings of the Financial Stability and Development Committee of the State Council (hereinafter referred to as the Financial Committee). In the last two meetings of the Financial Committee, "zero tolerance" for illegal activities in the capital market was mentioned.
On July 30, the China Securities Regulatory Commission held a mid-year work meeting and proposed to implement the "zero tolerance" requirement and severely crack down on illegal and criminal activities in the capital market. Continue to intensify the crackdown on malignant illegal and criminal cases such as fraudulent issuances, financial fraud, insider trading, and market manipulation, promote the establishment of a coordination mechanism for combating illegal activities in the capital market, and promote the construction of a three-dimensional and organic system in which administrative law enforcement, civil recovery, and criminal punishment are interconnected and mutually supportive.
According to statistics from the China Securities Regulatory Commission website, as of August 4, this year, the China Securities Regulatory Commission and local securities regulatory bureaus have issued 123 administrative penalty decisions and banned 46 people from the market. Among them, there were 48 fines for letter disclosure violations and 35 fines for insider trading. Letter disclosure violations and insider trading were still the focus, accounting for nearly 70% of the total number of fines.
Judging from the degree of punishment, 23 of the above 123 tickets were maximum penalties. Among them, 22 were illegal disclosures, and the listed company or the actual controller was severely punished, that is, a fine of 600,000 yuan was received. The other one is an insider trading ticket, which imposes a maximum penalty of "no one and five fines" on the violator.
Judging from the amount of fines and confiscations, since this year, at least 20 fines have been issued for individuals or persons acting in concert with amounts exceeding one million yuan. Among them, 6 fines have fines exceeding 10 million yuan, and 1 fines have exceeded 100 million yuan. Large fines are mainly concentrated in insider trading cases.
Among them, the highest penalty amount was an insider trading ticket issued to Wang Yuan and Wang Moumou and his daughter. The China Securities Regulatory Commission's administrative penalty decision showed that two people made a profit of 906 million yuan from insider trading in a listed pharmaceutical company in Guangdong, and were confiscated by the China Securities Regulatory Commission and fined three times for a total of 3.625 billion yuan.
According to the "2019 Securities and Futures Audit Law Enforcement Investor Protection Evaluation Report", throughout 2019, the China Securities Regulatory Commission and local securities regulatory bureaus made a total of 296 administrative penalty decisions, with a fine and confiscation amount of 4.183 billion yuan, and 66 people were banned from the market.
Three-dimensional accountability will become a trend
On July 31, the China Securities Regulatory Commission stated that it had recently transferred 10 cases of listed companies’ financial fraud and other suspected securities crimes to the public security organs in accordance with the law. Since 2019, the China Securities Regulatory Commission has transferred a total of 24 cases suspected of illegal disclosure and non-disclosure of important information to the public security organs.
Next, the China Securities Regulatory Commission will crack down on illegal securities and futures activities in accordance with the law, and comprehensively use mechanisms such as multiple investigations in one case, administrative penalties, market entry bans, forced delisting for major violations, criminal liability, and civil compensation to effectively increase the cost of illegal activities and make every effort to maintain the stable and healthy development of the capital market.
According to the reporter's review, among the above 123 fines, only 3 involved illegal borrowing of securities accounts, and were punished under the provisions of the new securities law.
"With the help of technological means, the efficiency of the CSRC's inspection and enforcement has been greatly improved in recent years. According to statistics, the investigation period of cases has been greatly shortened in the past two years, with an average investigation period of 133 days." Chen Bo, a partner at Deheng (Shanghai) Law Firm, told a reporter from Securities Daily: "After the CSRC files a case, the average investigation period is 4 The results will be announced every month. According to this pattern, there may be more fines for cases involving letter disclosure violations that apply to the new securities law. However, cases filed after March 1 are likely to be for violations before March 1, and in principle, the old law will apply.”
If fines applicable to the new securities law appear on a large scale, it is expected that large fines will be "unsurprising". "The new securities law has further increased the cost of violations of laws and regulations in the capital market by significantly increasing the penalties for fraudulent issuances, illegal disclosures, and non-disclosure of important information. As a result, perpetrators of violations will face higher administrative fines and civil compensation for investors." Zhu Yiyi, a lawyer at Guoco Law Firm (Shanghai), told a reporter from Securities Daily: "It is expected that a batch of letter disclosure violation cases that will be investigated for suspected misleading statements after March will first be subject to the new securities law."
The 36th meeting of the Financial Committee proposed that for typical cases of major importance and negative social impact, "collective litigation" should be launched promptly in accordance with the law. With the official release of the "Regulations on Several Issues Concerning Representative Litigation in Securities Disputes" by the Supreme People's Court, as well as relevant arrangements and rules issued by the China Securities Regulatory Commission and the China Securities Small and Medium Investor Service Center, the class action system with Chinese characteristics has been activated. Market participants expect that there will be cases involving securities class actions with Chinese characteristics within the year.
In terms of increasing criminal liability, the "Amendment to the Criminal Law of the People's Republic of China (Eleven) (Draft)" (referred to as the draft) has been reviewed by the Standing Committee of the National People's Congress and is currently soliciting opinions. The draft increases the penalties for the crimes of fraudulent issuance of stocks and bonds; the crime of illegal disclosure or failure to disclose important information; the crime of providing false supporting documents; and the crime of major inaccuracies in issuing supporting documents. Market participants believe that the amendments to the criminal law and the new securities law echo and complement each other, and will strengthen the crackdown on securities violations from multiple dimensions such as administrative, civil, and criminal. Reporter Wu Xiaolu
