The details of insider trading were exposed. The former director of Tongding Internet was informed criticism
Our reporter Gui Xiaosun
On November 15th, Tongding Internet issued an announcement, and Shenzhen Stock Exchange decided to punish informed criticism for the illegal insider trading of Qian Huifang, then a director, through someone else’s account actually controlled in January 2020. As early as August 2021, Tongding Internet issued an announcement that Qian Huifang was put on file for investigation, but the subsequent progress was not disclosed. In May this year, listed companies did not disclose relevant information after the punishment of Qian Huifang by Jiangxi Supervision Bureau of China Securities Regulatory Commission landed.
The Securities Daily reporter called the company to inquire about relevant matters. The staff said that Qian Huifang had resigned and was no longer a director of the company. The punishment was directed at him personally. The company did not receive the relevant punishment documents, and Qian Huifang did not take the initiative to mention this to the company. Therefore, the company did not make an announcement on this.
Information disclosure "has a beginning and no end"
On November 15th, the Exchange decided to punish informed criticism by Qian Huifang, then director of Tongding Internet. The punishment decision mentioned that according to the facts ascertained in the Decision on Administrative Punishment of Jiangxi Supervision Bureau of China Securities Regulatory Commission (hereinafter referred to as the Decision on Administrative Punishment),During his tenure as a director of Tongding Internet, Qian Huifang sold shares accounting for 0.91% of the total share capital of Tongding Internet from January 13 to January 20, 2020, with a turnover of 76.4794 million yuan.Qian Huifang failed to fulfill the pre-disclosure obligation 15 trading days before the first sale of Tongding Internet shares.
The Securities Daily reporter inquired from official website of China Securities Regulatory Commission that the above-mentioned administrative penalty decision was made in May this year, but Tongding Internet has not yet announced it. Further inquiry information shows that on August 9, 2021, Tongding Internet published a message that director Qian Huifang received the notice of filing a case with the CSRC, because it was suspected of insider trading. In other words, Qian Huifang, the then director, was placed on file to investigate this matter, and the information disclosure of Tongding Internet was "beginning and end".
Lawyer Wang Zhibin of Shanghai Minglun Law Firm told the Securities Daily reporter that according to Item 16, Paragraph 2, Article 22 of the Measures for the Administration of Information Disclosure of Listed Companies, the actual controllers, directors and other core people of the company were administratively punished by the CSRC, which is a major event that should be disclosed immediately. In addition, Article 5 of the Measures for the Administration of Information Disclosure of Listed Companies stipulates the principle of consistency in information disclosure. If the listed company announces the matters in which the relevant directors are put on file for investigation in the early stage, the subsequent investigation results shall be disclosed.
Lawyer Yang Zhaoquan, director of Beijing Weinuo Law Firm, believes that "after leaving office, directors no longer hold positions in the company and no longer have the status of’ directors’. Therefore, they are not in the required scope of disclosure. However, whether a matter should be disclosed, in addition to the identity of the parties, we should also consider whether the incident will have a significant impact on the company’s stock price, investors’ decision-making, and whether the listed company knows the matter in time before making a comprehensive judgment. "
Insider trading at the right time
According to the content of the administrative penalty decision, Qian Huifang’s insider trading is related to the performance of an acquired asset of Tongding Internet in 2017.
In March 2017, Tongding Internet acquired 100% equity of Baizhuo Network at a price of 1.08 billion yuan. In the first half of July 2019, the then Secretary of Tongding Internet and the accountant of Tianheng Certified Public Accountants conducted an on-site inspection on the accounts receivable of Baizhuo Network. The inspection shows that the accounts receivable and prepayments of Baizhuo Network show a rapid growth trend, the business situation is deteriorating, and the main assets have a large impairment risk. Subsequently, from August 18 to November 2019, Qian Huifang was informed in the work report that Baizhuo Network was likely to fail to fulfill its performance commitments in 2019, estimated losses, and impairment of goodwill.
On January 23, 2020, audited by Tianheng Certified Public Accountants, the estimated loss of Baizhuo Network in 2019 was 494.777 million yuan. On the evening of February 2, 2020, Tongding Internet released the 2019 annual performance forecast, saying that the net profit attributable to shareholders of listed companies in 2019 is expected to lose 2 billion yuan to 2.5 billion yuan, of which the goodwill formed by the acquisition of Baizhuo Network shows signs of impairment, and the amount of goodwill impairment reserve to be accrued is about 857 million yuan; The impairment reserve of polished rod production line and some optical fiber production lines under construction is about 500 million yuan; The estimated loss of Baizhuo Network in 2019 is about 500 million yuan.
Before the "bad news" was issued, from January 13 to January 20, 2020, Qian Huifang carried out insider trading through the account of her brother-in-law Lu Moming.
Straight flush data shows that in the five trading days after January 21, 2020, Tongding Internet’s shares continued to fall, and there were two trading days with daily limit.
"Article 53 of China’s Securities Law clearly stipulates that if insider trading causes losses to investors, it shall be liable for compensation according to law. Therefore, if Tongding Internet causes losses to investors due to the illegal and criminal behavior of insider trading of former directors, investors can file a civil lawsuit and ask the former directors to bear civil liability for compensation. " Yang Zhaoquan told the Securities Daily reporter.
Funds and stocks are mostly bought and sold by relatives’ accounts.
Wang Zhibin told the "Securities Daily" reporter that from the insider trading behavior detected by the regulatory authorities in the past, insiders usually do not directly trade the stocks involved in the case through their own accounts, but trade through the "mouse warehouse". However, in the face of big data, the "mouse warehouse" has been difficult to hide.
According to the facts found by the CSRC, Lu Mouming’s account transaction and fund password were mastered by He Mouliang, then manager of Tongding Internet Financing Department, and he was responsible for specific securities trading operations. In January and April of 2018, under the arrangement of Qian Huifang, 212.4 million yuan of funds were transferred from the bank account of Tongding Group Co., Ltd., the controlling shareholder of Tongding Internet, to Lu Moming’s account in two installments, and then the account bought shares of Tongding Internet through block transactions. On June 26, 2018, before the liquidation of 11 million shares of Tongding Internet in Lu Mouming’s account was frozen, the account sold some positions one after another. On January 14th, 2020, 11 million shares of Tongding Internet in Lu Mouming’s account were pledged in advance. From January 13 to January 20, 2020, Lu Mouming’s account was centralized and cleared to sell shares of Tongding Internet, with a turnover of 76.4794 million yuan to avoid losses of 17.06 million yuan. On January 22nd of the same year, Lu Moming’s account transferred out the proceeds from the stock sale and part of the existing funds, totaling 76.9701 million yuan, part of which was directly transferred to Wuxi Tyco Lingke Industrial Investment Partnership (Limited Partnership), and part of the funds were transferred to Wuxi Tyco Lingke Industrial Investment Partnership (Limited Partnership) through the accounts of Shan and Wang, all of which were used for the equity acquisition of Wuxi Deke Liguo Electronic Technology Co., Ltd.. The equity acquisition project is directly arranged by Qian Huifang as a whole, including equity transfer contract, third-party equity holding, fund transfer and allocation, etc. On February 11th, 2020,Lu Moming’s account transferred 7 million yuan to Qian Huifang’s daughter’s account corresponding to the three-party depository account. The evidence shows that Qian Huifang is the actual controller of Lu Moming’s account.
The above-mentioned estimated losses of Tongding Internet in 2019 are inside information. The inside information was formed no later than November 29, 2019 and made public on February 2, 2020. The sensitive period of inside information is from November 29, 2019 to February 2, 2020. Qian Huifang, director of Tongding Internet, and others are insiders of inside information, among which Qian Huifang knows that the time is no later than November 29, 2019.
Regarding Qian Huifang and He Mouliang’s insider trading "Tongding Interconnection" behavior, the administrative penalty decision shows that Qian Huifang’s illegal income was confiscated by 17.06 million yuan, and Qian Huifang was fined by 33.52 million yuan, and He Mouliang was fined by 600,000 yuan. Qian Huifang was ordered to make corrections, given a warning and fined 300,000 yuan for her illegal information disclosure.
Regarding the above matters, Wang Zhibin analyzed that in addition to the insider trading behavior of the former directors, Tongding Internet was also suspected of making false statements. "According to the facts identified by the CSRC, the inside information of asset impairment constitutes a major event, and the formation time is no later than November 29, 2019. According to the regulations, listed companies should disclose the major risks of asset impairment and huge losses in a timely manner, instead of disclosing related matters on February 2, 2020. "