The first case of illegal shareholding reduction under the new "Securities Law" has finally been settled.

  On the evening of May 27, WuXi AppTec announced that the company received the “Decision on Administrative Penalty” from the China Securities Regulatory Commission forwarded by the shareholder Shanghai Yingyi Investment Center (Limited Partnership) (hereinafter referred to as “Shanghai Yingyi”).

The "Decision" stated that Shanghai Yingyi failed to disclose as promised, and illegally reduced its holdings of WuXi AppTec by nearly 2.9 billion yuan, violating relevant regulations.

The China Securities Regulatory Commission ordered Shanghai Yingyi to make corrections, gave a warning, and imposed a fine of 200 million yuan.

  The China Securities Regulatory Commission stated that this case is the first case in which the new Securities Law has been punished for reducing holdings in violation of regulations.

In the next step, we will resolutely investigate and deal with illegal holding reductions in accordance with the law, guide shareholders, directors and supervisors to reduce holdings in a standardized, rational and orderly manner, and maintain the order of capital market transactions.

  Earlier on May 14, WuXi AppTec disclosed the prior notice of administrative punishment in the case.

Stocks are mainly acquired before IPO

  In accordance with the relevant provisions of the "Securities Law of the People's Republic of China" (hereinafter referred to as the "Securities Law"), the China Securities Regulatory Commission conducted a case investigation and trial on the violation of Shanghai Yingyi's shareholding in WuXi PharmaTech, and informed the parties of the administrative procedures. The facts, reasons and basis of punishment and the rights enjoyed by the parties according to law.

The parties did not submit statements or defense opinions, nor did they apply for a hearing.

The case has now been investigated and the trial concluded.

  Shanghai Yingyi was established on September 22, 2015 as a special fund for investing in WuXi AppTec projects. The fund's executive partner is Jiangsu Ruilian Investment Fund Management Co., Ltd., and the manager is Huashan Ruilian Fund Management Co., Ltd.

  WuXi AppTec was listed on the main board of the Shanghai Stock Exchange on May 8, 2018. Shanghai Yingyi holds 10.4787 million shares of WuXi AppTec, accounting for 1.0056% of the total share capital of WuXi AppTec. After two equity distributions and Hong Kong stock listing orientation In the additional issuance, Shanghai Yingyi holds 20.5383 million shares of WuXi AppTec, accounting for 0.8381% of the total share capital of WuXi AppTec.

  Shanghai Yingyi signed a voting proxy with Li, the actual controller of WuXi AppTec, entrusting the voting rights corresponding to all of its equity to Li to exercise.

According to the commitment not to reduce its holdings within 36 months from the listing date, the ban on WuXi PharmaTech held by Shanghai Yingyi will be lifted on May 10, 2021.

  Shanghai Yingyi made commitments on share reduction in WuXi AppTec’s IPO in 2018 and its 2018, 2019, and 2020 annual reports: “Those who reduce their shareholdings through centralized bidding transactions shall fulfill the 15 Report to the exchange on the relevant procedures such as the filing plan, announcement and other relevant procedures before one trading day, and ensure that the total number of shares to be reduced in any consecutive 90-day period does not exceed 1% of the company’s total shares at that time.”

Illegal reduction of nearly 2.9 billion yuan

  On May 10, 2021, after the lock-up period of WuXi PharmaTech held by Shanghai Yingyi expired, Chen Moujie, executive director and general manager of Jiangsu Ruilian Investment Fund Management Co., Ltd., the executive partner of Shanghai Yingyi, issued a reduction to the staff. Following WuXi AppTec's instructions, Shanghai Yingyi started to reduce its holdings of WuXi AppTec on May 14, 2021.

  From May 14 to June 7, 2021, Shanghai Yingyi reduced its holdings of WuXi AppTec by 16.108 million shares through the centralized bidding trading system of the Shanghai Stock Exchange (before the 2020 annual equity distribution).

On June 8, 2021, Shanghai Yingyi reduced its holdings of WuXi AppTec by 1,141,700 shares (after the 2020 equity distribution) through the centralized bidding trading system of the Shanghai Stock Exchange.

A total of 17.2497 million shares were reduced, accounting for about 0.6962% of WuXi AppTec's total share capital. The reduction price was: 143.49 yuan -176.88 yuan per share, and the total amount of reduction was 2.894 billion yuan.

  On the evening of June 11, 2021, WuXi AppTec disclosed the "Announcement on Shareholders' Breach of Commitment to Reduce the Company's Shares and Apologize through the Company", explaining the above-mentioned reduction.

Calculated according to the fictitious cost method, the illegal income is zero.

  The China Securities Regulatory Commission stated that the above-mentioned illegal facts, as evidenced by the factual description, agreement, inquiry record, WuXi AppTec announcement, industrial and commercial information, stock delivery note, etc., are sufficient to confirm.

The China Securities Regulatory Commission believes that, according to relevant regulations, Shanghai Yingyi is a shareholder of WuXi AppTec before its initial public offering, and its shareholding reduction should abide by the "Securities Law", "Regulations on Shareholding Reduction" and "Detailed Rules for Shareholding Reduction". Those who make promises should strictly fulfill the promises made.

  Shanghai Yingyi promises to report its information disclosure obligations to the stock exchange 15 trading days in advance, and Shanghai Yingyi should be the information disclosure obligor that needs to be disclosed in advance when reducing the holdings.

As the information disclosure obligor, Shanghai Yingyi did not fulfill the information disclosure obligation in a timely manner in accordance with the law, and violated the regulations, which constituted the behavior described in Article 197 of the Securities Law.

  As a shareholder of WuXi AppTec before its public offering, Shanghai YingYi is an information disclosure obligor that should be disclosed due to its commitment after WuXi AppTec’s IPO and relevant annual reports. The conduct violated Article 36 of the Securities Law and constituted the conduct described in Article 186 of the Securities Law.

  The behavior of Shanghai Yingyi's stock reduction without disclosure as promised constitutes the two violations mentioned in Articles 186 and 197 of the Securities Law respectively. Article 186 Penalties.

  To sum up, according to the facts, nature, circumstances and social harm of the parties’ illegal acts, and in accordance with the provisions of Article 186 of the Securities Law, the China Securities Regulatory Commission has decided to order Shanghai Yingyi Investment Center (Limited Partnership) to make corrections and issue a warning. , and imposed a fine of 200 million yuan.

  The reporter noticed that Article 186 of the "Securities Law" states that if the transfer of securities within the transfer restriction period, or the transfer of stocks does not comply with the laws, administrative regulations and the provisions of the securities regulatory agency of the State Council, it shall be ordered to make corrections, given a warning, and confiscated. Illegal gains, and a fine of less than the equivalent value of securities purchased or sold.

Resolutely investigate and punish illegal holdings reduction according to law

  Earlier on May 13, the China Securities Regulatory Commission answered a reporter's question.

It is understood that the China Securities Regulatory Commission issued an administrative penalty for WuXi AppTec shareholder Shanghai Yingyi’s illegal reduction of holdings.

  The CSRC stated that shareholders, directors, supervisors and senior management of listed companies have violated regulations to reduce their shares, disrupting the order of the securities market and harming the rights and interests of investors.

Article 36 of the new "Securities Law" specifically regulates the reduction of share holdings, requiring that the CSRC's regulations on holding period, selling time, selling quantity, selling method and information disclosure shall not be violated, and shall comply with securities trading. The business rules of the institute are also clearly defined.

Shareholders, directors, supervisors and senior management of listed companies should study hard and strictly abide by them.

Those who violate the above provisions shall bear corresponding legal responsibilities.

  In response to the reduction of shares held by shareholders, directors, supervisors and senior management, the Securities Law puts forward the principle requirements for information disclosure. Specific and detailed regulations.

For example, if the major shareholders, directors, supervisors and senior executives of a listed company reduce their shareholdings through centralized bidding transactions, they shall disclose their shareholding reduction plans in advance 15 trading days before the first sale.

This is an important institutional arrangement to protect the rights and interests of small and medium investors, and it is also a common practice in overseas mature markets.

Violating the information disclosure requirements in the process of reducing shareholdings is a typical behavior of reducing holdings in violation of regulations.

Relevant entities should deeply understand the connotation of the rules, fully understand the responsibilities for violations, and consciously abide by the relevant requirements, so as to promote the formation of a good market ecology and environment.

  In the next step, the CSRC will effectively implement the Securities Law and the Opinions on Strictly Crackdown on Illegal Activities in Securities Lawfully issued by the Central Office and the State Office, resolutely investigate and deal with illegal holding reductions, and guide shareholders, directors, supervisors and senior management to regulate, Rational and orderly reduction of holdings, and maintenance of capital market transaction order.

  (Broker China)

Keywords: