According to an official from the CSRC, the Provisions are an important institutional arrangement for the CSRC to fulfill the requirements of the No.55 Document issued by the General Office of the State Council and further prevent and crack down on insider trading. Through actions simultaneously taken in connection with the administrative permission procedures for material assets restructuring and the supervision on abnormal stock trading activities, the Provisions are intended to improve the awareness of listed companies conducting material assets restructuring, the interested parties and relevant entities about confidentiality and their capabilities of managing insider information.

In accordance with the Provisions, after suspension of trading for the purpose of material assets restructuring of a listed company, the securities exchange on which its shares are admitted for trading shall immediately initiate the abnormal stock trading examination procedure and timely report information on any abnormal stock trading activity to the CSRC. Where after examination the CSRC decides to investigate the listed company for any suspected insider trading, the listed company shall suspend its assets restructuring process and make timely information and risk disclosure. Where “elimination of adverse impact” can be achieved through the replacement or withdrawal of the entity(ies) suspected to have engaged in insider trading in any material assets restructuring transaction  from such transaction as required in the Provisions, with the “elimination of adverse impact” being determined based on the position and the role of such entity(ies) and on whether such entity is a legal person or a natural person, the listed company may resume the assets restructuring process upon confirmation by the securities exchange and the CSRC. Where a listed company, its majority shareholder, actual controller or any party to the transaction who accounts for more than 20% of the total transaction value has been imposed by the CSRC an administrative sanction or prosecuted by a judicial authority for criminal liabilities on the ground of insider trading in connection with such assets restructuring, the CSRC shall terminate the assets restructuring review procedure. In the process of material assets restructuring, securities exchanges shall be responsible for urging listed companies to make timely information and risk disclosure.

Over the years, the CSRC has been dedicated to preventing, controlling and cracking down upon insider trading. Focusing on major points and difficult aspects in the prevention and control of insider trading and those areas which attract major concern of retail investors, i.e. supervision on abnormal stock trading activities in connection with material assets restructuring of listed companies, the Provisions are designed to improve institutional arrangements, establish “examination, suspension, exclusion and resumption, and termination” mechanisms, specify the relevant entities that could be involved in insider trading, differentiate treatments applicable to different categories of entities with intensified prevention and crackdown efforts, effectively bring into play the functions of the capital markets in serving real economy, and achieve a balance between fairness and efficiency.

Meanwhile, in the drafting of the Provisions, the CSRC has also put emphasis on information and risk disclosure to limit the use of suspension of listing to the greatest extent, and on enhanced protection of the rights to know of retail investors as well as their lawful rights and interests.

The above-mentioned official said that the CSRC will, through public consultations, take into account comments and suggestions from the public and market players in a comprehensive and adequate manner, enhance the reasonableness and enforceability of the Provisions and issue the same where appropriate.