In the News: China Convicts Ex-UBS Banker for Insider Trading; New China-Japan ETF Connectivity Scheme; and M&A Profitability Requirements
July 02, 2019 | BY
Marilyn RomeroIn a landmark case, an ex-UBS banker was jailed for nine years for cross-border insider trading; the China-Japan ETF Connectivity scheme was launched with four index-tracking ETFs; and the CSRC is considering lifting profitability rules on listed company M&A activities.
Shanghai court convicts ex-UBS banker for insider trading
In a landmark criminal conviction in China linked to the Hong Kong Stock Connect scheme, the Shanghai No. 1 Intermediate People’s Court convicted a former banker of UBS’ Shanghai office in a cross-border insider trading case. The former banker, identified only by his surname, Sang, was sentenced to nine years in prison for his role in leaks made about a $6.3 billion takeover of Hong Kong-based Orient Overseas by Cosco Shipping Holdings Co in 2017. Court documents said that Sang shared information with two associates about the acquisition. Sang denied any wrongdoing, and said will appeal the verdict, according the court’s statement. Sang’s associates paid him Rmb5 million, or $731,000, for the information, and subsequently made total profits of more than $17 million by trading shares in the two companies.
China-Japan cross-border ETFs start trading
A new China-Japan ETF Connectivity program has launched, through which investors in one country can invest in the other’s cross-border exchange-traded funds, or ETFs, that have been listed on stock exchanges in the respective countries. The China Securities Regulatory Commission has already approved four cross-border ETFs. Two ETFs that are listed on the Shanghai Stock Exchange that will track Japan’s stock indexes; and two ETFs in Japan, listed on the Tokyo Stock Exchange, track China’s SSE 180 and CSI 500 indexes. The agreement was signed in April by the Shanghai Stock Exchange and Japan Exchange Group Inc, parent of the Tokyo Stock Exchange.
CSRC mulls scrapping profitability rules for M&As by listed companies
The China Securities Regulatory Commission, or CSRC, has invited public comments on its proposals to scrap profitability requirements in M&A activity by listed companies. The plans are part of China’s efforts to unwind some rules that followed the equity market crash in 2015, according to the South China Morning Post. The CSRC had tightened M&A and restructuring rules in 2016 in order to curb stock speculation following the crash in the summer of 2015. However, it now believes that scrapping M&A profitability requirements should facilitate secondary fundraisings at a time when the U.S.-China trade war is dampening investment. In a statement, the CSRC said it wants to ease fundraising restrictions for listed companies to help boost their cash flow, and to also provide support for back-door listings by hi-tech companies on the ChiNext board.
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