Three handed jail terms for insider trading
Sentence marks the first time an official of a listed company is imprisoned for offence
A mainland court yesterday handed out prison sentences to three people convicted of insider trading of Zhejiang Hangxiao Steel Structure shares, marking the first time an official of a listed company has been imprisoned for such an offence.
Analysts said the case was a signal that mainland courts would sentence more offenders in the near future in a bid to clean up price manipulation, insider trading and other misconduct on the nation's stock markets.
A Zhejiang intermediate court sentenced Luo Gaofeng, a securities representative of building materials maker Hangxiao, to 18 months in prison for disclosure of inside information, according to Xinhua.
Chen Yuxing, Hangxiao's former securities director, received a 2 1/2-year sentence for using the information provided by Luo. The court also sentenced Wang Xiangdong who partnered with Chen in the illegal trades, Xinhua said.
'The government is sending a message to the market that the crackdown on insider trading will intensify,' said Liu Chunquan, a lawyer with Guangsheng & Partners. 'Market players must abide by the law.'
Luo, who was in charge of disclosing information, released information on a major overseas construction contract to Wang and Chen in February last year before the official announcement.
The two investors' profit of 40.37 million yuan from the trading scandal was confiscated and each was fined an additional 40.37 million yuan, Xinhua said.
'The Hangxiao scandal might just be the tip of the iceberg,' said Haitong Securities analyst Zhang Qi. 'The market is waiting for the government to expose more cases.'
The China Securities Regulatory Commission (CSRC) said in July last year that it would punish Yan Bian Highway Construction and Jilin Aodong Medicine Industry Groups for insider trading.
In January, the CSRC said in a statement that it would join hands with law-enforcement departments to weed out unlawful stock trading.
The regulator is now waging a nationwide campaign on suspicious trading activity, according to a source.
Analysts said it would be a daunting task under the fledging legal system and weak law enforcement.
'It remains difficult for small investors to seek compensation for losses due to scams,' said Mr Liu. 'But obviously the government is determined to protect individuals and ensure social stability.'
While the Hangxiao case saw the first jail term for insider trading, which came after CSRC implemented new rules on information disclosure in January last year, mainland courts have previously sent offenders of other trading rules to prison.
In September 2003, a Guangzhou court sentenced Li Hongqing to 3? years in prison after he was convicted of manipulating the share price of Yorkpoint Science & Technology.
In 2001, Li and his company rigged the price of Yorkpoint, making it the first mainland stock to pass the 100 yuan a share mark. The scandal was followed by a sharp market fall.