In 2022, the inspection department of the China Securities Regulatory Commission will severely crack down on various securities and futures violations, handling 170 cases of insider trading, 78 cases of market manipulation, and 203 cases of information disclosure violations, including 94 cases involving financial fraud.
Recently, the China Securities Regulatory Commission notified the handling of cases in 2022. In 2022, the inspection department of the China Securities Regulatory Commission will severely crack down on various securities and futures violations. It handled 603 cases throughout the year, including 136 major cases, and transferred 123 suspected criminal cases and notification clues to the public security organs. The case verification rate reached 90%. The relevant person in charge of the China Securities Regulatory Commission stated that overall, the number of cases has continued to decline, the quality and efficiency of case handling has improved significantly, the “strict” regulatory atmosphere has been further consolidated, and the market ecology has been further purified.
Specifically, in terms of insider trading, the momentum of frequent cases has been curbed, and 170 insider trading cases were handled throughout the year, a year-on-year decrease of 15%.
“However, the market habit of ‘relying on inside information to make profits’ has not yet been eradicated, and major events such as mergers and acquisitions and changes in actual controllers are still high-incidence areas for insider trading.” Human direct transactions still account for 40%. Some directors of listed companies bought relevant stocks after learning that the company was planning a major restructuring, and sold them for a profit after the information was disclosed; some senior executives of subsidiaries of listed companies knew that the company would make major investments and used their own and spouse’s accounts for insider trading to make profits.
In terms of market manipulation, the total number of cases decreased, and 78 cases of market manipulation were handled throughout the year, a year-on-year decrease of 30%.
“The characteristics of organization and gangs are becoming more obvious.” According to the relevant person in charge of the China Securities Regulatory Commission, the phenomenon that insiders of listed companies jointly manipulate gangs to speculate on the company’s stock price still exists. Throughout the year, more than ten listed company actual controllers and executives colluded with each other to manipulate the market. Multiple trader teams raised and maintained the company’s stock price through methods such as inversion and false declaration, and agreed on a profit share.
In terms of financial fraud, illegal cases still occur, and the illegal methods are concealed and complicated. Handled 203 illegal cases of information disclosure throughout the year, of which 94 involved financial fraud, accounting for 46%.
“The concealment of counterfeiting methods has increased.” The relevant person in charge of the China Securities Regulatory Commission introduced that some actual controllers organized executives and employees of listed companies to implement counterfeiting throughout the entire process according to the predetermined target; some introduced well-known corporate subsidiaries to act as customers and carry out false trade. The counterfeiting business “increases credit”; some matchmaking through market brokers and hire “professional” teams to tailor counterfeiting plans for them.
It is worth mentioning that cases in specific fields are still prone to occur, and the crackdown on illegal activities has achieved remarkable results. The first is to crack down on the behavior of “hollowing out” listed companies, handling 64 cases of capital occupation and illegal guarantees, and transferring 15 cases of alleged breach of trust and damage to the interests of listed companies to the public security organs. The second is to strictly investigate the false information disclosure of bonds, handle 5 cases of illegal bond information disclosure, and resolutely curb fraudulent bond issuance and financial fraud. The third is to investigate and deal with illegal private equity activities in accordance with the law, handle 20 cases of violations of laws and regulations by private equity institutions, and effectively rectify illegal fundraising, illegal transactions, and illegal operations.
“In recent years, the China Securities Regulatory Commission has insisted on ‘system building, non-intervention, and zero tolerance’, strengthened the punishment of major cases and law enforcement in key areas, severely cracked down on securities illegal activities, and cracked down on illegal activities such as insider trading, market manipulation, and financial fraud. It is more precise, and the risks in key areas continue to converge.” Yang Delong, chief economist of Qianhai Kaiyuan Fund, said that this is of great benefit to creating an open, fair and just market environment, accelerating the promotion of all parties in the market to perform their duties, and improving the overall quality of listed companies.
In addition, as the “gatekeepers” of the capital market, the performance of intermediary agencies has attracted market attention. Judging from the disclosure situation, the number of illegal cases of intermediary agencies remains high, and the problem of dereliction of duty and vacancy of some subjects is prominent. Throughout the year, 44 intermediary agencies failed to perform their due diligence cases, involving 36 intermediary agencies.
“The subjects involved in the case and the fields of the case are more diverse.” According to the relevant person in charge of the China Securities Regulatory Commission, accounting firms, securities companies, asset evaluation agencies, law firms, and credit rating agencies are all involved in the case. Fixed increase, bond issuance, annual report audit, asset restructuring and other types. There are also individual practitioners who have seriously violated the practice regulations. Some signing accountants did not actually participate in the audit work, and were willing to act as “rubber stamps”; some assisted listed companies to forge agreements to inflate their income, and became “accomplices” in fraud.
Tian Lihui, dean of the Financial Development Research Institute of Nankai University, said that intermediary agencies’ responsibility is an important link to improve the quality of information disclosure in the capital market, and it is an important basis for preventing securities fraud and counterfeiting and protecting the legitimate rights and interests of investors. In particular, the comprehensive registration system reform has given the market the right to choose, and moved the threshold of accountability forward. Intermediary agencies need to enhance their awareness of compliance, improve their ability to practice, and effectively control the “entry gate” of the capital market. Regulatory departments should strengthen the effective linkage of daily supervision, supervision and inspection, and inspection and law enforcement, strictly investigate the illegal responsibilities of intermediary agencies and practitioners in accordance with the law, and vigorously urge them to play the role of “gatekeeper” in the capital market.
At present, the reform of the stock issuance registration system has been officially launched in an all-round way. The deeper the capital market reform is, the heavier the task of combating market chaos and purifying the market ecology will be. The relevant person in charge of the China Securities Regulatory Commission stated that in the next step, the inspection department of the China Securities Regulatory Commission will adhere to the “zero tolerance” work policy, strictly crack down on various securities and futures illegal activities in accordance with the law, increase the cost of violations, strengthen law enforcement deterrence, protect the legitimate rights and interests of investors, and safeguard the interests of investors. The capital market developed healthily and steadily.
Source of this article: Economic Daily, original title: “The China Securities Regulatory Commission notified the handling of cases in 2022, involving insider trading, market manipulation, financial fraud, etc.”
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