RULES ON INSIDER TRADING TIGHTENED
June 02, 2008 | BY
clpstaff &clp articles &The government has issued the Supplementary Rules to the Standards for Pursuing Economic Crime Cases on May 13 to crack down on an increasing number of…
The government has issued the Supplementary Rules to the Standards for Pursuing Economic Crime Cases on May 13 to crack down on an increasing number of illegal financial activities such as insider trading and market manipulation.
Issued by the Supreme People's Prosecution and Ministry of Public Securities, the Supplementary Rules to the 2001 Standards have increased the threshold of trading volume from Rmb200,000 to Rmb500,000 and added a test for profits or avoided losses of over Rmb150,000.
“The Supplementary Rules are a gap-filler for enforcing the Criminal Law by the prosecution and investigation authorities and also provide certain thresholds for Securities Law,” said Greg Pickrell, partner at Pillsbury Winthrop Shaw Pittman. Under the Securities Law, the Supplemental Rules will affect some provisions on criminal liabilities. Though the Securities Law has laid down in great detail various types of offenses, the context of specific offenses has no explicit references to the Criminal Law, Pickrell said.
“The Criminal Law is the basis for criminal prosecutions of general types of crimes; the Securities Law provides for a general framework of offenses and the Supplemental Regulations bridge the gap on when criminal liabilities should be assessed,” he said.
Pickrell said that the elevation of thresholds for instituting criminal litigation indicates that offenses are involved in a greater number of trading volumes and this reflects a phenomenon in which more offenses are being committed by the same people.
“The intent (of the rules) seems to focus on more serious offenses,” he added.
Some areas of the rules still need to be clarified. According to Pickrell, some elements for liability are unclearly defined. The term “common scheme”, for example, is being used extensively in this context, but without any definition. Furthermore, guidelines on compensation remedies to investors and creditors
are not specified in the Supplementary Rules.
Pickrell said he expects that the rules will provide better guidance to prosecutors and investigators when they need to decide which offenses to prosecute. The rules will also allow corporate directors and executives to be better able to determine the consequences of their business judgments, he said.
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