Summary of Key Points
The Supreme People's Court and the Supreme People's Procuratorate have jointly revised the judicial interpretation regarding insider trading offenses. In response to the more concealed nature of current insider trading activities, the larger amounts involved, and the increased difficulty in detecting such crimes, they have taken stricter measures to combat insider trading and the disclosure of confidential information. These actions aim to purify the capital market environment and protect ordinary investors from being used as unwilling accomplices in these illegal transactions.
1. Who Are the Primary Targets for Insider Trading Surveillance? The Scope Has Expanded!
In the past, it was believed that only company directors, supervisors, and senior executives, who have direct access to confidential information, would be subject to investigation. However, the new regulations have broadened this scope:
- Not only do these individuals themselves fall under the jurisdiction, but also their close relatives (such as spouses, children, parents) and people with whom they have a close relationship (like close friends or business partners);
- Even those who have communicated with these informed individuals (for example, friends with whom company matters were discussed over a meal) can be identified as key parties in insider trading if they buy or sell related stocks during sensitive periods in a manner that appears suspicious and without providing a legitimate reason or source for their actions.
In other words, anyone associated with someone with access to confidential information and who engages in irregular stock transactions during sensitive times may become a target of regulation. This essentially means that the “circle of insiders” is now within the scope of supervision.
2. The “Sensitive Periods for Insider Information” Are Finally Clearly Defined
The new regulations clearly define what constitutes a sensitive period: it starts from the moment confidential information begins to take shape (for instance, when a company starts discussing a merger or acquisition or prepares to announce significant financial results) and continues until the information is officially made public.
Previously, some individuals tried to evade punishment by exploiting the ambiguity around when a period was considered sensitive. For example, they might trade stocks just as the news began to emerge but before it was officially announced. The new regulations strictly define this timeframe, making any transactions during this period illegal, regardless of whether the person claimed to be unaware of the information.
3. Advanced Regulatory Techniques Are Being Used to Prove Crimes Even Without Confessions
Insider traders are becoming more sophisticated, using accounts belonging to others, deleting communication records, or outright denying their involvement. However, the new regulations include more advanced regulatory methods:
- Digital and intelligent tools are used to track transaction data (for example, if your account suddenly buys a large amount of a particular stock and you have contacted someone with access to confidential information);
- Indirect evidence is also collected (such as call records, WeChat chat history, and financial transaction patterns).
For instance, in the case of Ma from the Beijing Third Intermediate People's Court, although he was an external director who used another person’s account to profit 4.9 million yuan during a sensitive period and refused to admit guilt, the court still convicted him of six years in prison and fined him 13 million yuan based on evidence of his communications with insiders and timing of his transactions.
4. Increased Penalties to Make Them Effective
The core of the new regulations is to impose stricter punishments:
- The China Securities Regulatory Commission has fined a total of 35.3 billion yuan in the past two years, with many of these fines related to insider trading cases;
- The new regulations specify that in addition to financial penalties, more severe sentences will be imposed (for example, Ma was fined 13 million yuan, which is 2.6 times the amount he profited).
In other words, while previous penalties might have been limited to fines, now traders not only have to return the illegally obtained money but also face substantial fines and potential imprisonment, effectively deterring them from engaging in insider trading.
5. Reminders for Two Groups of People
- For Key Figures (Directors, Supervisors, Senior Executives, and Their Relatives): Don’t take chances; the regulatory net is now very tight. Even if you use someone else’s account or delete records, you may still be caught, and not only will you face punishment, but your family and friends could also be affected.
- For Ordinary Investors: Don’t believe in so-called “insider information.” Those who claim to have internal channels are likely trying to trick you into buying stocks based on false claims. It’s best to invest based on the company’s fundamentals and avoid speculation.
In summary, these new regulations aim to tighten the rules against insider trading, making the market more fair and ensuring that ordinary investors are no longer used as unwilling participants in illegal activities.