China’s regulator gets tough on insider trading as it metes out record penalty on wrongdoers in the financial markets
- Shanghai entrepreneur and his daughter were slapped with a record fine and had their ill-gotten gains confiscated, in a penalty valued at 3.6 billion yuan
- The couple used their inside information to build a long position in Shanghai-listed Joincare Pharmaceutical Group ahead of the company’s disclosure of a stake sale to units controlled by two of China’s best known investors
China’s securities regulator slapped two individuals with a record fine for insider trading and confiscated their ill-gotten gains, meting out 3.6 billion yuan (US$508 million) of penalties in an unprecedented enforcement to stamp out corporate malfeasance in the country’s financial markets.
The regulator is getting tough in its resolve to instil financial discipline in Asia’s largest capital market, as a wave of cheap money - unleashed to help global economies recover from the coronavirus pandemic - is finding its way into the world’s equities and money markets. A new security law that took effect on March 1 also gave the regulator the teeth for enforcement and increased the cost of violations.
The CSRC issued 19 penalties in the first quarter, 35 per cent more than a year earlier, with most cases involving insider trading, market manipulation and violations of disclosure rules. The penalty on the Wangs would be the largest financial punishment by the CSRC in a single swoop, according to state-owned newspaper China Securities Journal, surpassing the 3.47 billion fines against the ex-controller of Shanghai Duolun Industry for price manipulation and disclosure breaches.
The Wangs got hold of information in March 2015 about a plan by Joincare’s second-largest shareholder Hongxinhang to transfer a 4.8-per cent stake to two units controlled by two of China’s most renowned investors, the CSRC said.