China is doubling its efforts to crack down on fraud and illegal activities in its multi-trillion-dollar financial markets with the strict enforcement of its tougher regulations. This week, the country's securities regulator slapped a record 3.6 billion yuan or $508 million penalty on two individuals, who were charged with insider trading.
The China Securities Regulatory Commission (CSRC) penalized Shanghai entrepreneur Wang Yaoyuan and his daughter Wang Chengcheng. The two were charged with insider trading after they were caught using internal company information prior to buying shares in Joincare Pharmaceutical Group.
The share purchase reportedly netted gains of more than 906 million yuan after the pharmaceutical company's stock more than doubled following a series of stake acquisitions, which the Wangs were made privy to. The Wangs reportedly got hold of news in March that one of Joincare's shareholders was planning to sell a 4.8 percent stake in the company to two well-known investors.
The 4.8 percent stake was purchased by Tencent-controlled Advance Data Services and ZhongAn Online P&C Insurance's Miaofeng Limited. The Wangs reportedly gained the information through phone calls with ZhongAn CEO Ou Yaping and through several meetings with top executives.
With the information, The Wangs created 21 trading accounts in Shanghai to build a long position in Joincare's stock. Combined, the Wangs had around 74.8 million Joincare shares. After the stock prices more than doubled, the Wangs then offloaded some of their stocks for a hefty profit.
According to the CSRC, the Wangs activities had triggered a few red flags as their trading activities were obviously abnormal. The agency added that the large amounts of money that were invested by the numerous trading accounts were eventually all traced back to the Wangs. The companies involved in Wang's activities, including Tencent and Zhong An, were not penalized or reprimanded.
The action is the latest enforcement of tougher securities laws in China, which had taken effect back in March. The law was meant to give regulators the teeth for enforcement and to deter any further activities via the increased costs of violations. For the first quarter of this year, the CSRC issued a total of 19 penalties, a 35 percent increase when compared to the same period last year. The majority of the penalties had involved insider trading and market manipulation.
The penalty slapped on the Wangs is the largest financial punishment issued by the CSRC on any single case, surpassing the 3.47 billion penalty slapped against former the Shanghai Duolun Industry controller.
