——Prevention and control of insider trading in mergers and acquisitions

Editor's note: Since the beginning of this year, the China Securities Regulatory Commission has continued to maintain a high pressure on insider trading, and further consolidated its achievements in combating and preventing insider trading. As of October 31, 158 new insider trading cases have been investigated and 67 cases have been filed, accounting for all open cases. 42% of it. Among the insider trading cases investigated and handled, the main insider information was still M&A and restructuring information.

In view of the fact that listed companies in the jurisdiction are currently in the active phase of mergers and acquisitions, in order to avoid insider trading that affects the process of company mergers and acquisitions, the Second Division of Corporate Supervision of Jiangsu Securities Regulatory Bureau has introduced in recent years closely related to insider trading and listed company mergers and acquisitions. The regulatory documents are sorted out, and some important contents are interpreted. In addition, the latest typical cases are also included as a special learning material for the "12.4" National Legal Promotion Day for listed companies, counterparties and their controlling shareholders, and actual control People learn to master.

【table of Contents】

1. Interpretation of specific regulations

2. Related cases

3. Relevant legal regulations

1. Interpretation of specific regulations

(1) The China Securities Regulatory Commission’s Interim Provisions on Strengthening the Supervision of Abnormal Stock Trading Related to the Material Asset Restructuring of Listed Companies (CSRC Announcement [2012] No. 33, December 17, 2012)

The "Regulations" link the supervision of abnormal stock transactions with the administrative license for major asset restructuring. In fact, it closely links the inside information management of the parties, interested parties, and related entities of the major asset restructuring with the major asset restructuring, and the relevant parties can only do it effectively. Keep insider information confidential, otherwise it will directly affect the smooth progress of mergers and acquisitions.

Article 2 of the "Regulations" clarifies that in addition to listed companies, counterparties, their controlling shareholders, and actual controllers must also do insider information management and registration of insider information. If the above-mentioned entities are found to have insider trading, they will The reorganization has caused substantial obstacles that cannot be eliminated.

Article 4 of the “Regulations” clarifies that listed companies should disclose information in stages, that is, when the parties to a major asset restructuring transaction have initially reached substantive intentions or have not reached any substantive intentions, they should promptly report to them when it is expected that the information will be difficult to keep confidential. The exchange applies for the suspension of stock trading, and conducts phased information disclosure in a true, accurate, complete, timely and fair manner to fully reveal the risks.

Articles 5 to 7 of the "Regulations" establish a system of "verification upon change, suspension upon filing, resumption upon exclusion, and termination upon violation of regulations". After the listed company has suspended trading and entered the major asset restructuring process, the exchange immediately initiated the verification process for abnormal stock trading and reported it to the China Securities Regulatory Commission in a timely manner. At the same time, the listed company shall be informed of the conclusion of abnormal trading, and the listed company shall decide whether to proceed with the reorganization independently. If the listed company decides to proceed with the reorganization, it shall also make a risk warning of abnormal stock trading.

After the Securities Regulatory Commission examines the information on abnormal stock trading, if it is deemed to be suspected of insider trading and decides to file a case for inspection, the listed company shall suspend the restructuring process and promptly disclose information and risk warnings. After the suspension of the major asset restructuring process, the relevant parties can classify and deal with it according to the status and role of the subject suspected of insider trading in the major asset restructuring, as well as the difference between legal persons and natural persons. If it falls within the Regulations, it can be achieved by replacing or exiting the reorganization transaction. "Eliminate the impact", the listed company can resume the restructuring process. If the listed company and its controlling shareholder, actual controller, and counterparty that accounted for more than 20% of the total transaction amount of the reorganization are administratively punished by the China Securities Regulatory Commission for insider trading or are held accountable by the judicial authority in accordance with the law, the listed company The reorganization process should be terminated; when it enters the administrative licensing stage, the China Securities Regulatory Commission terminates the review.

(2) Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on the specific application of law in criminal cases involving insider trading and disclosure of inside information (Fa Shi [2012] No. 6, June 1, 2012)

The judicial interpretation clarified the main aspects of the identification of insider information, persons who illegally obtained inside information, the identification of obvious abnormalities in related transactions, the identification of the sensitive period of inside information, insider trading, and the conviction and sentencing standards for leaking inside information. Need to pay attention to the following points:

1. Article 2 of the judicial interpretation stipulates that the close relatives of the insider information person or other persons who are closely related to the insider information person engage in or express or imply that others are engaged in the inside information sensitive period, or disclose the inside information to cause others to engage in it. If the securities and futures transactions related to the inside information are obviously abnormal, and there is no legitimate reason or the source of the information, they will be identified as the persons who illegally obtained the inside information. If the circumstances are serious, criminal responsibility shall be investigated.

2. Article 5 of the judicial interpretation stipulates that the initial time of the motion, planning, decision-making or execution of a major event in inside information is the time when inside information is formed. Listed companies and relevant entities shall complete the registration of insiders and management of insider information from this time.

2. Related cases

(1) Cases where the review was suspended before the meeting of the M&A and Restructuring Committee

1. Jiangsu Hongbao's restructuring review "stopped"

The company’s major asset reorganization application materials were accepted by the China Securities Regulatory Commission on September 2, 2013; on November 22, the company received a notice from the China Securities Regulatory Commission that the relevant parties involved in the reorganization were investigated and filed for suspected violations of the law. The reorganization application was suspended for review.

http://company.cnstock.com/company/scp_dsy/tcsy_syttjdt2/201311/2820375.htm

2. Sinosteel Jitan's restructuring is suspended or related parties are suspected of insider trading

The company’s major asset reorganization application materials were accepted by the China Securities Regulatory Commission on September 23, 2013; on November 8, it received a notice from the China Securities Regulatory Commission that the relevant parties involved in the reorganization were investigated and filed for suspected violations of the law, and the company merged The reorganization application was suspended for review.

http://finance.eastmoney.com/news/1345,20131112336654495.html

(2) Cases of being suspended after the approval of the M&A committee meeting

1. Huace Television’s acquisition of Keton Media is suspended for review

The company's major asset restructuring was unconditionally approved by the M&A Committee meeting on November 4, 2013. Four days later, the relevant parties involved in this major asset restructuring were filed for investigation on suspicion of violation of the law, and the major asset restructuring was suspended for review by the China Securities Regulatory Commission. http://if.stockstar.com/IG2013111100000132.shtml

2. Beiren's application for share reorganization has been suspended for review

The company's merger and reorganization was unconditionally approved by the M&A committee meeting on January 21, 2013. The investigation was filed for suspected violations of the relevant parties involved in this merger and reorganization, and the review was suspended by the Securities Regulatory Commission on January 25. After a suspension of 8 months, the China Securities Regulatory Commission approved the company's restructuring plan on September 26.

http://money.163.com/13/0128/09/8MA1P35U00253B0H.html

3. Relevant legal regulations

(1) Securities Law

Article 5 (Provisions in Principle), Article 73 (Prohibition of Insider Trading), Article 74 (Scope of Insiders), Article 75 (Inside Information), Article 76 (Specific Provisions) , Article 202 (Penalty Provisions). http://www.law-lib.com/law/law_view.asp?id=102905

(2) Criminal Law (revised in 2011)

Article 180 [Crimes of Insider Trading, Leaking Inside Information] Persons who know the inside information of securities and futures trading or those who illegally obtain inside information of securities and futures transactions shall be involved in the issuance of securities, securities, futures trading or other securities transactions. , Before the information that has a significant impact on the price of futures trading is made public, buying or selling the securities, or engaging in futures trading related to the inside information, or divulging the information, or expressly or implying that others are engaged in the above-mentioned trading activities, and the circumstances are serious , Sentenced to fixed-term imprisonment of not more than five years or criminal detention, and concurrently or separately a fine of one to five times the illegal gains; where the circumstances are particularly serious, to fixed-term imprisonment of not less than five years but not more than ten years, and also to one to five times the illegal gains fine. http://www.szxingshi.com/95w9.html

(3) Notice of the General Office of the State Council on forwarding the opinions of the China Securities Regulatory Commission and other departments on cracking down on, preventing and controlling insider trading in the capital market in accordance with the law (Guobanfa [2010] No. 55)

The "Notice" requires:

The first is to promptly formulate a confidentiality system involving inside information of listed companies, including measures for the management of insider information by state personnel, clarify the scope of inside information, circulation procedures, confidentiality measures, and accountability requirements, and designate institutions and personnel responsible for inside information management.

The second is to establish a registration system for insiders as soon as possible, require insiders to register in accordance with regulations, and implement the confidentiality responsibilities and obligations of relevant personnel.

The third is to improve the relevant systems for information disclosure and trading suspension and resumption of listed companies, and urge listed companies and other information disclosure obligors to disclose information in a true, accurate, complete and timely manner in strict accordance with laws and regulations.

Fourth is to improve the evaluation system, incorporate the prevention and control of insider trading into the enterprise performance evaluation system, and clarify the principles, content, standards, procedures and methods of the evaluation. http://www.gov.cn/zwgk/2010-11/18/content_1748349.htm

(4) Provisions on the establishment of a registration management system for insiders of inside information by listed companies (China Securities Regulatory Commission Announcement [2012] No. 30)

The "Regulations" are an important supporting system for implementing Document 55 of the State Council, and a specific specification for the management of insider information of listed companies. The "Regulations" require listed companies to establish a registration and management system for insiders, fill in insider files as required, and manage the confidentiality of inside information. When a listed company conducts acquisitions, major asset reorganizations, issuance of securities, mergers, divisions, share repurchases and other major matters, in addition to the establishment of insider information insider files, a memorandum on the progress of major matters shall be prepared in accordance with the requirements, and the information on the above major matters shall be prepared. After publicly disclosed in accordance with the law, the memorandum on the progress of major issues and the insider file of the insider information shall be submitted to the exchange in a timely manner.

http://www.csrc.gov.cn/pub/zjhpublic/G00306201/201110/t20111026_201068.htm

(5) The China Securities Regulatory Commission’s Interim Provisions on Strengthening the Supervision of Abnormal Stock Trading Related to the Major Asset Restructuring of Listed Companies (CSRC Announcement [2012] No. 33)

http://www.csrc.gov.cn/pub/newsite/flb/flfg/bmgf/ssgs/bgcz/201310/t20131016_236320.htm

(6) Notice of the Shenzhen Stock Exchange on Strengthening the Supervision of Abnormal Stock Trading Related to the Major Asset Restructuring of Listed Companies http://www.szse.cn/main/disclosure/bsgg/39748761.shtml

(7) Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate on the specific application of law in criminal cases involving insider trading and disclosure of inside information (Fa Shi [2012] No. 6) http://www.court.gov.cn/spyw/ xssp/201209/t20120928_178548.htm

(8) Understanding and Application of "Interpretation on Several Issues Concerning the Specific Application of Law in Criminal Cases of Handling Insider Trading and Leaking Inside Information" http://www.law-lib.com/fzdt/newshtml/21/20121210134101.html