Business / Markets

Top court set to define insider trading, market manipulation

By Chen Jia (China Daily) Updated: 2012-05-24 09:29

China's top court is expected to release new judicial interpretations this year to help define criminal conduct involving market manipulation and illegal trading using insider information in the securities market, the national industry regulator said on Wednesday.

Relevant legal guidance that involves civil compensation is also being studied, the release of which can better protect investors' interests and ensure a fairer trading environment, according to a senior official with the China Securities Regulatory Commission.

China's securities market has long been plagued by manipulation and "rat trading", as some brokers and high-level managers of financial institutions use inside information acquired on the job, reaping illicit gains and affecting share prices.

"Based on solid research, the pending new legal guidelines can clarify the criteria to judge those criminal cases and shorten the investigation process," the CSRC official said.

The CSRC said that Zheng Tuo, a former fund manager with the Bank of Communications Schroder Fund Management Co Ltd, was recently detained on suspicion of rat trading.

Zheng earned illegal profits of about 14 million yuan ($2.2 million) from March 2007 to August 2009 by trading more than 50 companies' shares using non-public information.

"The 'rat trading' negatively influenced the stock prices and increased trading costs for the relevant fund investors," said the official.

On Tuesday, the Supreme People's Court issued a judicial interpretation of the criminal criteria for insider trading and leaks of secret economic data, aiming to better protect the securities market.

From December to April, the inspection department of the CSRC received 199 tips about cases in the securities market.

Among the total, 45 came from letters, up 40 percent from a year earlier, the CSRC said in a statement.

"People who provide such tips should be encouraged and rewarded, which may be written into the securities law in the future," the CSRC official said.

In the past five years, Chinese judges tried 22 cases involving insider trading and leaks of secret data, and the number of such cases is increasing every year, according to Sun Jungong, spokesman for the Supreme People's Court.

Because of difficulties in collecting evidence, the number of cases that went to trial was much fewer than the actual number, the top court said.

"We have much to do in improving investigation methods, while the crime is much more covert and high-tech," the CSRC official added.

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