The Criminal Law Amendment will be officially implemented on March 1, 2021. Securities crimes will face heavy penalties
The maximum penalty for fraudulent issuance is 15 years
The Criminal Law Amendment (Eleventh) (hereinafter referred to as the "Amendment") was formally reviewed and passed recently and will come into effect on March 1, 2021.
The Beijing News reporter noted that the amendments have greatly increased the criminal punishment for four types of securities and futures crimes, including fraudulent issuance, falsified information disclosure, provision of false certification documents by intermediaries, and market manipulation, and strengthened the “keys” such as controlling shareholders and actual controllers. Investigating the criminal responsibility of the minority, and consolidating the "gatekeeper" duties of sponsors and other intermediary agencies.
On March 1 this year, the new securities law has been officially implemented. After March 1 next year, the securities law and the criminal law will work together to effectively increase the cost of securities violations and protect the legitimate rights and interests of investors, which will become the foundation of the rule of law in my country's capital market.
What are the major changes?
Four types of securities and futures crimes have been revised to substantially increase penalties
This revision of the Criminal Law mainly revised four types of securities and futures crimes, including fraudulent issuance, fraudulent information disclosure, provision of false certification documents by intermediaries, and market manipulation.
Among them, the amendment has substantially increased the maximum sentence and fines for illegal and criminal acts related to fraudulent issuance and information disclosure and falsification.
For fraudulent issuance, the amendment increases the maximum sentence from 5 years imprisonment to 15 years imprisonment, and changes the fines for individuals from 1%-5% of illegally raised funds to "combined fines" and cancels the 5% limit Restrictions, the fines for units raised from 1%-5% of illegally raised funds to 20%-1 times.
For information disclosure falsification, the amendment raises the upper limit of the imprisonment period of relevant responsible persons from 3 years to 10 years, the amount of fines is revised from 20,000 to 200,000 yuan to "combined fines", and the upper limit of 200,000 yuan is removed.
In addition, the amendment strengthens the responsibilities of controlling shareholders and actual controllers for illegal acts of letter disclosure, and clarifies that if the controlling shareholder or actual controller implements or organizes or directs the implementation of illegal acts of letter disclosure, it shall be punished in accordance with the provisions of the relevant responsible persons mentioned above; If the shareholders and actual controllers are units, a "double penalty system" is implemented for the units and the directly responsible personnel.
At the same time, with reference to the provisions of the new Securities Law, the amendments further clarify criminal responsibility for new market manipulations such as "fraud trading manipulation", "deceitful trading manipulation", and "capture manipulation" in response to new market manipulation situations.
This amendment adds three new types of situations on the previous basis: “not for the purpose of closing, frequent or large numbers of declarations for buying, selling of securities, and futures contracts and withdrawing declarations”, “using false or uncertain material information, Induce investors to conduct securities and futures transactions", "make evaluations, forecasts or investment recommendations on the disclosure of securities, securities issuers, and futures trading targets, and conduct reverse securities transactions or related futures transactions at the same time."
expert's point
The registration system and the implementation of the new securities law require higher authenticity
Fu Lichun, financial committee member of the Chinese Market Association, told the Beijing News reporter that it is very necessary for this amendment to the criminal law to increase the penalties for violations related to the securities market.
China's capital market has developed rapidly for 30 years, and many factors have changed, especially the scale of transactions, which has become the world's second largest market.
However, the punishment for illegal acts lags far behind the actual development speed of the market, which creates a serious imbalance between the costs and benefits of illegal acts, and to a certain extent also provides soil for illegal acts.
Fu Lichun said that the capital market has entered a higher stage of development, and the legal system needs to keep up. The securities law has been revised and updated, but for some major violations, other laws are needed. The criminal law is a very critical part. .
With the implementation of the registration system and the new securities law, the requirements for integrity and authenticity of information disclosure have been raised to a higher level, so it is also very urgent to increase the cost of violations in this regard.
Yang Delong, chief economist of Qianhai Kaiyuan Fund, said that severe penalties are the basis for ensuring the long-term and healthy development of the A-share market and the legal guarantee for the full implementation of the registration system.
The future A-share market will depend on the improvement of these laws, regulations and systems to protect it.
The A-share market will also be more mature and more investable, truly protecting the interests of small and medium investors.
Crack down on financial fraud?
Since last year, 22 companies have been filed for future administrative punishment + criminal punishment
Financial fraud seriously challenges the seriousness of the information disclosure system. It is a "cancer" in the securities market and has always been a target of severe and severe blows by the regulatory authorities.
According to the data released by the China Securities Regulatory Commission in April this year, since 2019, the China Securities Regulatory Commission has accumulatively filed investigations into 22 listed companies' financial frauds, imposed administrative penalties on 18 typical cases, and transferred 6 suspected financial frauds to the public security organs. .
However, due to legal restrictions, the CSRC imposed a maximum of 600,000 yuan in administrative penalties on issuers, listed companies, etc., for fraudulent acts, which is extremely incompatible with the amount of fraud in many major cases, and has long increased the cost of violations. 'S voice is very strong.
In the case of Kangmei Pharmaceutical's fraud, from 2016 to 2018, Kangmei Pharmaceutical's cumulative inflated revenue was as high as 30 billion yuan, and the inflated profit was 4 billion yuan. The amount of fraud shocked the market.
In the end, the Securities Regulatory Commission imposed a fine of 600,000 yuan on Kangmei Pharmaceutical, and fines ranging from 900,000 to 100,000 yuan on 21 responsible persons.
In addition, in the financial fraud case of Zhangzidao that "scallops ran and ran", in the 2016 annual report, Zhangzidao inflated profits by 130 million yuan by inflating operating costs and inflating non-operating expenses; in the 2017 annual report It also inflated profits by 280 million yuan.
In mid-June this year, the China Securities Regulatory Commission made an administrative penalty decision on Zhangzidao’s information disclosure violations and imposed a fine of 600,000 yuan on Zhangzidao Company and fines ranging from 30,000 to 300,000 yuan on 15 responsible persons.
In September of this year, the China Securities Regulatory Commission will transfer Zhangzidao and related personnel suspected of securities crimes to the public security organs for criminal responsibility.
The new securities law passed in December last year has increased administrative penalties for securities violations.
For acts of false records, misleading statements or major omissions in the information disclosed by listed companies, the maximum fine will be increased from the original 600,000 yuan to 10 million yuan; for fraudulent issuance, the fines for unissued securities are 2 million to 20 million yuan Yuan, 10%-1 times the amount of funds raised for the fines for the issued securities.
This amendment to the Criminal Law further increased the criminal sanctions for securities crimes, and jointly established the accountability system with the combination of administrative punishment and criminal punishment with the new securities law.
expert's point
There is no ceiling on personal fines for fraudulent issuance and letter fraud
Liu Junhai, a professor at the School of Law of Renmin University of China, told the Beijing News that the Criminal Law Amendment actually has no ceiling on the amount of personal fines for fraudulent issuance and letter fraud. This is a signal that makes criminals "frightened".
In addition, the amendment strengthens the accountability of “key minorities” such as controlling shareholders and actual controllers, and focuses on penalizing the controlling shareholders and actual controllers behind listed companies to prevent investors from suffering secondary harm due to the fines of listed companies.
Liu Junhai said that the cost of violations is not limited to administrative penalties. Offenders have to bear civil liability, credit liability and even criminal liability according to the nature and circumstances of the illegal act.
In addition to administrative responsibilities, the new securities law has activated the representative litigation system and established a credit filing system in the securities market, which is also the improvement of civil and credit responsibilities.
The four legal responsibilities of administrative, civil, criminal, and credit are simultaneously applicable and not contradictory in many specific situations.
Only in this way can we give full play to the nine social functions of the law: compensation, reward, sanction, warning, education, comfort, guidance, protection, and regulation.
Yang Delong, chief economist of Qianhai Kaiyuan Fund, said that the criminal law amendment has greatly increased the illegal cost of financial fraud and financial fraud, which will greatly deter criminals and combat those who try to control stock prices through financial fraud or profit manipulation. It is a severe blow to fraudulent issuance.
Main changes in the Criminal Law amendments (partial)
Significantly increase the cost of violations
Fraudulent issuance
●The amendment increases the maximum sentence of imprisonment from 5 years to 15 years
●Change the fines imposed on individuals from 1%-5% of the illegally raised funds to "combined fines", and remove the 5% upper limit
●The fines imposed on units increased from 1%-5% of illegally raised funds to 20%-1 times
Sword refers to the "old problem"
Information disclosure fraud
●The amendment raises the maximum sentence of relevant responsible persons from 3 years to 10 years
●The amount of fines was revised from 20,000 to 200,000 yuan to "combined fines", and the upper limit of 200,000 yuan was removed
●The amendment strengthens the responsibility of controlling shareholders and actual controllers for illegal acts of letter disclosure, and clarifies that if the controlling shareholder or actual controller implements, organizes, or instigates the implementation of illegal acts of letter disclosure, it shall be punished in accordance with the provisions of the relevant responsible persons mentioned above
●If the controlling shareholder and actual controller are the unit, the unit and the directly responsible person will be subject to the "double penalty system"
Three new types of market manipulation
●Referring to the provisions of the new securities law, in response to new market manipulation situations, the amendments further clarify criminal responsibility for new market manipulation behaviors such as "fraud trading manipulation", "deceitful trading manipulation", and "capture manipulation"
Consolidate the "gatekeeper" responsibilities of intermediary agencies
●The amendment clearly regards the sponsor as the criminal subject for the crime of providing false certification documents and the crime of issuing major documents that are inaccurate, and this crime shall be investigated for criminal responsibility
●For lawyers, accountants and other intermediary agencies that issue false certification documents in securities issuance or major asset trading activities, and the circumstances are particularly serious, a higher sentence is clearly applicable, and the maximum sentence is 10 years in prison
Beijing News reporter Gu Zhijuan