The securities market's requirements for "strict management" of listed companies are not limited to the disclosure of corporate information, and the punishment for a series of violations under the capital market transactions has been increased. The most typical is that the administrative organs' punishment for insider trading, market manipulation and market disruption has been significantly expanded at the upper and lower limits, and the means of punishment have gradually separated from the simple fine punishment and adopted a variety of punishment methods, in order to achieve the ultimate goal of regulating the chaos of the capital market. For enterprises that intend to or have successfully connected to the capital market, understanding the administrative authorities' focus on the management and control of capital market transactions is the first step to avoid the risk of punishment, and how to legally implement capital market transactions is the second step to avoid the risk of punishment. This paper will first elaborate on the illegal behavior of insider trading in combination with cases to help enterprises clarify the many risks of capital market trading.

1. Definition of insider trading

Insider trading refers to the behavior that a person who knows the inside information of an enterprise buys and sells securities with the inside information obtained, or passes the inside information to a third party through private contact, and the third party buys and sells securities based on the inside information and makes profits. This kind of insider trading behavior will seriously affect the normal operation of the securities market, making the securities market become a tool for a small number of people to obtain excessive profits. This kind of trading behavior will make the securities market lose its basic credibility, hinder other investors' enthusiasm for investment, eliminate their enthusiasm for investment, and cause serious damage to the securities market.

2. Insider

Insider refers to the person who can obtain the inside information of the enterprise through his/her identity. Common personnel include: directors, supervisors and senior managers of the issuer; Shareholders holding more than 5 percent of the company's shares and its directors, supervisors and senior managers; The actual controller of the company and its directors, supervisors and senior managers; The company controlled by the issuer and its directors, supervisors and senior managers; Persons who have access to inside information about the company due to their positions in the company; Personnel of securities regulatory bodies and other personnel who, due to their legal duties, administer the issuance and trading of securities; Relevant personnel of sponsors, underwriting securities companies, stock exchanges, securities registration and settlement organizations, and securities service organizations. Because insider trading can be carried out by the unit as the main body. Therefore, the issuing enterprise itself can also be called the main body of insider trading.

3. The composition and consequences of insider trading violations

According to Articles 53 and 191 of the new Securities Law, people who know inside information about securities trading and those who illegally obtain inside information are not allowed to buy or sell the securities of the company before the inside information is made public, or disclose the information, or advise others to buy or sell the securities. Where insider trading acts cause losses to investors, they shall be liable for compensation according to law.

If a person who has insider information about securities trading or illegally obtains insider information engages in insider trading in violation of the provisions of Article 53 of the Securities Law, he shall be ordered to dispose of his illegally held securities according to law, his illegal gains shall be confiscated, and he shall be fined for an amount between one and ten times his illegal gains; If there are no illegal gains or the illegal gains are less than 500,000 yuan, a fine of not less than 500,000 yuan but not more than 5 million yuan shall be imposed. Where a unit engages in insider trading, it shall also give a warning to the persons in charge directly responsible and other persons directly responsible, and impose a fine of not less than 200,000 yuan but not more than two million yuan. Any staff member of the securities regulatory body under The State Council who engages in insider trading shall be given a heavier punishment.

It should be pointed out that enterprises not only need to avoid insider trading themselves, but also need to avoid insider trading by internal employees, because the employees who can obtain the inside information of enterprises are often senior executives of enterprises. For such senior executives due to the implementation of insider trading, resulting in administrative organs, and even judicial punishment, the punishment behavior and punishment results are listed companies need to publicly disclose information, once the punishment is issued and announced, it will have a serious impact on the company's stock price. Therefore, it is necessary to strictly restrict the insiders who know the inside information to avoid the occurrence of the above situation.

[Typical case -- Insider trading case of Zhongzhi Investment Development (Beijing) Co., LTD.]

Chunan Dingtai Investment Management Co., LTD. (hereinafter referred to as Chunan Dingtai), Zhuhai DBS Capital Management Co., LTD. (hereinafter referred to as Zhuhai DBS) and Huzhou Hongkang Investment Management Co., LTD. (hereinafter referred to as Huzhou Hongkang) are wholly-owned subsidiaries of Zhongzhi Investment. The senior management personnel are Zhongzhi Investment staff. The securities account of the company shall be opened by Zhongzhi Investment staff on behalf of the company.

Li Xuan, Zhao Yunhao, Yang Jiji for Qinshang shares to acquire concave concave education insider information, Zhao Yunhao, Yang Jiji for Qinshang shares to acquire Siqi education insider information. After the two sides of the transaction began to negotiate, Zhao Yunhao repeatedly tracked and asked about the progress of the acquisition, and reported the relevant progress to Li Xuan through the form of weekly reports and work summaries, suggesting that Zhongzhi Investment buy "Qinshang shares" in the secondary market. Li Xuan, as the chairman of the board, understood and mastered the negotiation process and content of Zhao Yunhao's team and Qinshang shares. Under the promotion of Li Xuan, on September 28, 2016, Zhongzhi Group held a review meeting and agreed to buy "Qinshang shares" in the secondary market.

【 CSRC Analysis 】

The CSRC believes that, first, the transaction involved constitutes a major event of Qinshang shares. When Qinshang Shares signed the "Memorandum of Capital Increase/Acquisition" with Concave-convex Education, Qinshang Shares reached a consensus on the overall acquisition of Concave-convex Education and made transaction arrangements, and the relevant work was promoted step by step without affecting the identification of the overall transaction amount. The overall purchase amount of Qinshang Shares is RMB 260,000,000, accounting for 11.50% of Qinshang Shares' audited net assets of RMB 2,252,258,062 in 2015, which is a material event as described in paragraph 2 (2) of Article 67 of the Securities Law. Constitutes inside information as stipulated in Article 75, Paragraph 2 (1) of the Securities Law (2014 edition). Secondly, the stock price of listed companies is affected by multiple factors at the same time, and the stock price performance follows the causal logic of multiple causes and one effect, and the significance of individual matters cannot be simply rejected by the absence of obvious fluctuations in stock price.

Second, in view of the parties' claims that they did not actually participate in the process of acquiring Concave-convex Education and that Qinshang shares had no substantive acquisition intention, they are not accepted for the following reasons: First of all, after Qinshang Shares, convex Education and Zhongzhi Investment set up a working group on September 5, 2016, the parties repeatedly communicated and arranged the due diligence work, Zhao Yunhao and Yang Ji participated in the communication for many times and constantly learned the progress of the acquisition from Hu and Zhang, and the situation of Qinshang Shares' intention to acquire convex Education was more clear. Secondly, as of October 2016, the parties from Zhang Wei, Hu and others have received feedback information on the smooth progress of the acquisition, and then, Qinshang shares and convex education further agreed on the acquisition method and valuation, and Zhongzhi Investment since October 25, 2016 began to buy a large number of "Qinshang shares". The parties' defense that they are not optimistic about the acquisition and believe that Qinshang shares have no substantive acquisition intention does not affect the identification of their knowledge of inside information, and it is inconsistent with the behavior logic of buying "Qinshang shares" in large quantities.

Third, in view of the parties' claims that they did not participate in Qinshang shares' acquisition of Siqi Education and did not know the relevant information, they are not accepted for the following reasons: On September 20, 2016, when meeting with Zhang, Zhao Yunhao, Yang Ji and others, Hu expressed the willingness of Qinshang shares to acquire Qiuqiao Education and Siqi Education as a whole. On October 9 of the same year, Hu and Zhang Wei successively told Zhao Yunhao that the plan of Qinshang shares to acquire Siqi Education was basically determined; On October 11, Yang Ji also expressed his willingness to jointly acquire Siqi Education to Hu Mou, and learned from Hu Mou that the acquisition of Siqi education by Qin Shang shares was progressing smoothly. It can be seen that the parties understand the progress of Qinshang's share acquisition of Siqi Education and know the relevant inside information.

Fourth, regarding the party's claim that insider information did not form when it purchased "Qinshang Shares", it is not accepted for the following reasons: First, regarding Qinshang shares' acquisition of convex education, on September 5, 2016, Mr. Hu approved the confidentiality agreement for Qinshang shares' acquisition of Convex Education; On the same day, Qinshang Shares, Concave-convex Education, Zhongzhi Investment set up a working group for the acquisition of concave-convex education in order to promote follow-up work, enough to determine that the inside information was formed no later than that date. Secondly, regarding the acquisition of Siqi Education by Qinshang shares, after Qinshang shares expressed their intention to acquire Siqi Education as a whole, Li Mou, chairman of Siqi Education, agreed to cooperate on September 23, 2016, the two sides initially reached an intention to cooperate, and entrusted Zhang Mou Wei to negotiate specific matters, enough to determine that the inside information was formed no later than that date. On October 9 and 11, 2016, Hu informed Zhao Yunhao and Yang Ji successively that the acquisition had been negotiated, and the two learned inside information.

Fifth, regarding the parties' claims that Qinshang shares have investment value, that they do not purchase Qinshang Shares on the basis of inside information, or that they do not purchase Qinshang Shares on a sudden basis, they are not accepted for the following reasons: First, the parties' arguments are contradictory and cannot reasonably explain their behavior of buying Qinshang Shares during the sensitive period. For example, on the one hand, the parties said that the market performance of "Qinshang shares" was not optimistic, and on the other hand, they said that the reason for buying "Qinshang shares" was that they were optimistic about Qinshang shares. Another example is that on the one hand, the parties say that "it is the market consensus that the transformation of (Qinshang Shares) has not been successful so far", but on the other hand, they argue that because the market recognizes the transformation of Qinshang shares, they buy "Qinshang shares". Secondly, the parties advocate that Qinshang shares are optimistic about the transformation to the education industry, and provide a number of public reports from January 2016 to January 2017 as evidence, but the relevant reports were mainly published from January 2016 to September 5, 2016, and there were no similar reports from September 6 to October 25. The parties began to buy "Qinshang shares" on October 25, which shows that their defense of the basis for buying does not match the characteristics of their actual buying behavior. Finally, after the relevant personnel learned the inside information, with the continuous elaboration of the acquisition negotiations between Qinshang Shares and relevant parties, the account involved in the case has also bought "Qinshang shares" for more than 30 times, which shows that the purchase intention is determined. To sum up, the parties bought a large number of "Qinshang shares" after learning the inside information, and there was no legitimate information source or legitimate reason, and their justification was not enough to explain the abnormality of the trading behavior involved.

【 Case Study 】

Insider trading is one of the more common illegal acts in the capital market. The core feature of this behavior is that insider trading makes the formation process of securities prices and indexes lose timeliness and objectivity, and makes securities prices and indexes become the result of speculation by a few people using insider information, rather than the result of comprehensive evaluation of corporate performance by the investing public. Eventually, the securities market will lose its function of optimizing resource allocation and acting as a barometer of national economy. Therefore, in recent years, with the obvious increase of insider trading cases and the expanding of the scope of insider information, the punishment of insider trading in our country's securities laws has gradually increased. In this case, Zhongzhi Investment Development (Beijing) Co., Ltd. used the securities accounts of its wholly-owned subsidiaries Chun 'an Dingtai Investment Management Co., LTD., Zhuhai DBS Capital Management Co., Ltd. and Huzhou Hongkang Investment Management Co., Ltd. to buy a large number of Qinshang Shares after knowing the inside information of Qinshang Shares' acquisition of Siqi Education, which constituted insider trading. Through this case, it is necessary to note that the determination of insider trading is not based on the appearance of the transaction, even if the enterprise tries to hide its buying behavior using inside information by separating multiple transactions, it still does not affect the determination of insider trading.