China Securities Regulatory Commission (CSRC) : 609 cases were handled in 2021, involving typical illegal activities such as financial fraud

2022-05-06 0 By

According to the website of China Securities Regulatory Commission (CSRC), on February 18, THE CSRC notified the handling of cases in 2021:In 2021, THE CSRC will resolutely implement the decisions and deployment of the CPC Central Committee and The State Council on strictly cracking down on illegal securities activities in accordance with the law, adhere to the working principle of “building institutions, non-interference and zero tolerance”, and investigate and handle major cases strictly and quickly according to the law centering on the supervision work.A total of 609 cases were handled in the whole year, including 163 major cases, involving typical illegal behaviors such as financial fraud, capital occupation, market manipulation in the name of market value management, malicious insider trading and intermediary agencies failing to perform their duties diligently.In accordance with the law, 177 suspected criminal cases (clues) were transferred to public security organs, an increase of 53% year on year, and special law enforcement actions were jointly deployed with the Ministry of Public Security and the Supreme People’s Procuratorate, further strengthening the synergy of securities law enforcement and justice.On the whole, the number of crimes declined for three consecutive years, and the tendency of illegal occurrence in the securities market was initially curbed.At the same time, law enforcement has become more focused, with false statements, insider trading, market manipulation and intermediary agencies accounting for more than 80% of the cases.I. The number of false statement cases remains high, and major fraud and falsification occur from time to time.In 2021, 163 cases of false statement were handled, including 75 cases of financial fraud, up 8% year on year.32 suspected criminal cases were transferred to public security organs, an increase of 50% year on year.First, the evolution and upgrading of illegal means, deliberately using new forms of business, new models to cover up fraud.Organized and systematic fraud cases accounted for about 60% by forging contracts, falsely writing invoices and other common practices. Some listed companies disguised their performance by confirming income in advance, undercounting asset impairment and other ways, and some fabricated the completion schedule of engineering projects, confirming falsely increased profits in advance.Supply chain finance, commercial factoring and other new forms of business have gradually become new “masks” of fraud. Some have falsely increased revenue by 56.2 billion yuan and made up profits by 4.7 billion yuan in the name of supply chain finance.Some use commercial factoring to carry out fraud.Second, some cases involve a large amount of money, a long cycle, and a bad market impact.About 60% of financial fraud cases are seriously suspected of crimes, and more than 30% of cases have been more than three years of fraud.Some listed companies falsely increased their income by 12.9 billion yuan from commodity trade.Some companies under the banner of confidential products and many listed companies fictitious business.Some began to falsify their performance before going public, and the actual controller even manipulated the company’s stock price for illegal profits after going public.Third, illegal occupation of security cases still occur, major shareholders through a variety of ways to embezzle company funds.The number of cases handled was 73, up 69% year on year.Some actual controllers directly transfer funds of listed companies and falsify bank statements to conceal occupation;Some fictitious project funds and investment funds occupy 5.8 billion yuan of listed companies’ funds;Some actual controllers, without deliberation by the board of directors or the general meeting of shareholders, provided guarantees for the affiliated enterprises in the name of listed companies without authorization, totaling about 1.8 billion yuan.2. Market manipulation cases have more obvious characteristics of teamwork and professionalism, and some cases have attracted high attention from the market.In 2021, 110 cases of market manipulation were handled, down 26% year on year, and 41 cases were transferred to public security organs, an increase of 1.5 times year on year.From the perspective of manipulation motives, some manipulation gangs lure the market to follow suit and seek improper benefits by means of continuous trading, false declaration, inversion and demagogy.Some actual controllers of listed companies have manipulated their own stocks by controlling the content and pace of information disclosure and cooperating with market institutions to achieve the purpose of reducing their holdings at a high level, preventing the delisting of stock prices at par value and avoiding the explosion of pledged stocks. It has been confirmed that 14 cases of market manipulation involve actual controllers or management of listed companies.From the perspective of manipulation subjects, there are many involved subjects and long chains, forming illegal profit networks.Manipulation gangs collude with listed companies inside and outside, using capital and shareholding advantages to focus on raising stock prices and seeking short-term price differences;The stock market “black mouth” to lure small and medium investors to take over at a high price, according to the amount of goods received single share income;The distribution intermediary provides financial support for the offering party and extracts interest in accordance with a certain proportion;The market broker takes the initiative to pull strings and conspire to manipulate after charging fees.From the perspective of manipulation mode, long-term “holding” and “fast in and fast out” are combined, capital advantage and information advantage interact, forming relatively fixed manipulation mode and process in target selection, capital preparation, warehouse construction and washing, lifting and shipping and other links, and a number of “habitual offenders” and “repeat offenders” of market manipulation are investigated for administrative and criminal responsibility.Third, the frequent occurrence of insider trading is slowing down, and the key link problems are more prominent.In 2021, there were 201 cases of insider trading, with the number of cases declining for three consecutive years.In terms of crime areas, insider trading cases involving major capital operation information, such as mergers and acquisitions, new share issuance and change of control, accounted for 64%. Insider trading cases involving performance announcements and business cooperation also occurred.In terms of case types, loss-avoidance insider trading cases occurred continuously.If the actual controller of a listed company sells the stocks held before the impairment of goodwill is made public, avoiding a loss of 49 million yuan;Some private fund managers, knowing the bearish information due to their participation in the rescue plan of listed companies, sold the relevant stocks at a high position before the information was made public, avoiding a loss of 19 million yuan.From the perspective of the subject of the cases, insider trading and disclosure of insider information by legal information insiders accounted for about 60%, and the proportion of cases was still high. A number of typical cases such as the chairman of a listed company making 11.9 million yuan from insider trading were verified.Iv. Various types of cases in key areas should be investigated and dealt with in a timely manner.First, 20 illegal cases involving registration, fund sales, fund raising and other links were handled by private equity institutions.Second, 10 illegal bond market cases were handled, mainly for fraudulent issuance of fictitious profits, and submitting false materials to obtain approval of corporate bond issuance.Third, there was a rebound in rat warehouse cases, 9 cases were handled throughout the year, and the subjects involved extended to the background management and technical service personnel of market institutions.Fourth, illegal cases in the field of futures occurred from time to time, handling 5 related cases, involving the manipulation of multiple commodity futures contracts.Fifthly, there were 16 cases of illegal stock trading by employees, involving more than 90 people.V. Illegal cases involving intermediary agencies are on the rise, and the subjects involved cover many fields.In the whole year, 39 cases were investigated, more than double that of the same period last year.Involving certified public accountants, 28, the securities company 4, 3, the asset appraisal institution law firm 2-1 each, bank underwriters, rating agencies, cover the initial public offering, annual audit, merger, acquisition and reorganization, bond issuance, selected layer board business links such as, for the first time, the Banks underwriting inter-bank bond market, a rating agency, to initiate an investigation.Among them, annual report audit is still a concentrated field. A total of 16 accounting firms were suspected of not being diligent in the annual report audit of more than 20 companies. Some of them were investigated by THE ASSOCIATION six times in one year, and the internal risk control failed.Some to help listed companies to avoid fraud forced delisting, as an accomplice to fraud.In the next step, the CSRC will focus on the full implementation of the Opinions on Strictly Cracking down on Illegal Securities Activities in accordance with the law, focus on key areas, highlight major cases, adhere to the “double investigation of one case”, effectively increase the cost of illegal activities, effectively improve law enforcement deterrence, and provide a strong legal guarantee for the reform, development and stability of the capital market.Screenshot of CSRC website Responsible Editor: Wang Tianyue