Over the past two years, some people took advantage of their positions to facilitate access to insider information, or directly carry out insider trading, or leak the information to others and make illegal profits. Such behaviors badly undermined the transaction order and demoralized the investors. Therefore, the China Securities Regulatory Commission (CSRC) has attached great importance to those violations and taken such counter measures as strengthening the monitoring, timely detecting clues to the cases, and intensifying inspection efforts, thus cracking down on the insider trading effectively. Recently, the CSRC has informed the media of its investigation into the following three cases.

Based on the clues found in daily supervision, in May 2008, the CSRC put the violations of laws and regulations made by Gaoxin Zhangtong Co., Ltd. (Gaoxin Zhangtong) on record for inspection. According to the administrative investigation, there existed such violations of securities laws and regulations as deceptive issuance, illegal disclosure of important information, insider trading, perfidy and doing harm to the listed company’s interests in Gaoxin Zhangtong and among some of its senior management including General Manager Guo Zhaoxiang, and some of those behaviors were even suspected of committing crimes.

Based on the clues found in daily supervision, in November 2008, the CSRC put the suspected insider trading during the reorganization of some listed company in Sichuan Province on record for inspection. According to the administrative investigation, as the important participants of both reorganized parties, Li (the Director of the business department of some commercial bank’s Jinan Branch) and Zhang (the Deputy General Manager of some industry corporation in Shandong Province) took advantage of their available insider information during the reorganization and made huge profits from large trade of shares in the listed company, which was suspected of committing the crime of insider trading according to Article 180 of the Criminal Law.

Based on the clues found in daily supervision, in June 2007, the CSRC put the suspected insider trading during the discussion on the scheme of targeted additional shares issuance by Xiamen Prosolar Technology Development Co., Ltd. (Prosolar Technology) on record for inspection. According to the administrative investigation, Shanghai Zulong Landscape Development Co., Ltd. (Shanghai Zulong, the controlling shareholder of Prosolar Technology’s largest and 2nd largest shareholders) made large trade of shares in Prosolar Technology through its related company during Prosolar Technology’s targeted additional shares issuance. Shanghai Zulong’s behavior was suspected of committing the crime of insider trading by units according to the Criminal Law and the Supplementary Provisions on the Standards for Pursuing Cases of Economic Crime (the Supplementary Provisions). Besides, during the additional issuance, there were also records of trading of shares in Prosolar Technology in the accounts of Prosolar Technology’s actual controller Chen and his wife.

The administrative investigation of the aforesaid three cases has been completed, and the documentary evidence of the suspected crimes has been sent to the public security organs to claim against the suspects for criminal liabilities.

The official from relevant CSRC division said that the insider trading is featured by covert operation and serious illegality, and even coexistence of multiple offenses. Such behaviors badly violate the principle of openness, justice and fairness in securities market, harm investors’ legal rights and interests, and hinder the sound development of securities market. Therefore, the CSRC is fully committed to rigidly enforcing the laws and cracking down on the insider trading. As for those being suspected of committing securities crimes, the cases shall be handed over to the public security organs to claim against the suspects for criminal liabilities.

It was also said that from 2008 to the end of March 2009, the CSRC handed over 19 suspected criminal cases to public security organs according to law. Thereinto, 6 cases concerned listed companies; 8 cases concerned insider trading; 2 cases concerned market manipulation; 2 cases concerned illegal operation of securities investment advisory business; and 1 case concerned capital embezzlement by the staff of a financial institution. It was learnt that the public security organs had put 15 cases on record for inspection.

The official also said that with the successive promulgation of the Supplementary Provisions and the Criminal Law Amendment (VII), in 2009, the CSRC would maintain a sound and steady market by further coordinating with public security organs, procuratorates and courts, intensifying inspection, enforcement and prosecution on criminal responsibilities, rigidly cracking down on such securities-related crimes as insider dealing, market manipulation, illegal information disclosure, perfidy and doing harm to the listed company’s interests.