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Original title: Chairman’s participation in insider trading should be severely punished
Source: Beijing Commercial Daily
As the saying goes, “I often walk by the river, how can I not wet my shoes”,Jinke CultureChairman Wang Jian suffered from the consequences of crazy and illegally reducing holdings. Judging from the announcement issued by Jinke Culture, Wang Jian was filed for investigation for suspected insider trading during the period from November 2019 to March 2020, and this incident was quickly pushed to the forefront of public opinion. This column believes that the chairman’s insider trading reduction of the company’s shares is extremely lethal, and it is not easy to detect that it is hidden. Investors are easily injured and should be punished.
Previously, stocks were divided into tradable shares and non-tradable shares. As the leader of a listed company, the chairman’s shares were basically non-tradable shares, which could neither be pledged to securities firms nor reduced in the secondary market. Therefore, as far as the chairman is concerned, the price trend has little effect on his wealth. With good company performance, more dividends are the right way.
With the development of the capital market, there has been a share-trading reform. In other words, the shares held by the chairman and major shareholders can not only be pledged to the brokerage firm, but can also be directly traded in the secondary market. In order to turn the holdings into cash as soon as possible, a structural reduction followed, that is, a special intermediary agency helped the chairman and major shareholders plan how to realize the stock as soon as possible. Among them, part of the stock can be transferred to a third party through a block transaction, and the third party will then reduce its holdings through the secondary market.
There is also a passive reduction method. There are three key links. The first is to try every means to push up the stock price. The second is to pledge as many shares as possible at a high level. The third is to not add collateral or cash if the stock price drops a lot, but directly let the brokerage firm liquidate. Although the price of the stock and liquidation is much lower than the highest point of the stock price, it is still much higher than the true value of the company.
In fact, for listed companies, there is nothing wrong with executives’ reduction of holdings, but it is a different matter to reduce holdings with ulterior motives or even in violation of regulations.
For example, many of Wang Jian’s passive reductions even occurred during the sensitive period of the window. On February 4 this year, the Shenzhen Stock Exchange issued a regulatory letter stating that Wang Jian had reduced his holdings through centralized bidding due to forced liquidation during August 15-27, 2019 and October 16-21, 2019. Science culture stocks, the total amount involved is as high as 57.99 million yuan. The aforementioned reduction of holdings occurred within 30 days before the disclosure of Jinke Culture’s 2019 semi-annual report and third quarterly report, which constituted a sensitive period transaction.
This column has repeatedly and repeatedly proposed that the holdings of major shareholders should not be used for pledge. Because the impact of the liquidation is too great, and many major shareholders have not lifted the ban, the reduction of shares is not announced, and it does not comply with the reduction requirements. As the stocks are pledged, once the margin is insufficient, they have reason to directly let the brokerages liquidate whether it is in the sensitive period or not in compliance with the reduction regulations.
This column believes that stocks that major shareholders or senior executives have not lifted the ban and have not announced the reduction of their holdings should not be pledged. If it is pledged, the brokerage firm also has no right to liquidate the stocks that do not comply with the reduction policy.
It has to be said that small and medium-sized investors are the most hurt by illegal shareholding reduction and insider trading.
This column suggests that the supervision must severely punish the chairman of the board who recognizes insider trading, because the harm they bring to the securities market is not small.
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