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In the first ten months of 2009, forty five people were punished due to trading during ban period, short-swing trading and failure to disclose online the trading information in time.
As of October 2009, the Shanghai Stock Exchange (SSE) had conducted overall inspection twice on the illegal shares trading by listed companies' directors, supervisors and senior management this year, with 45 people punished due to their illegal trading. The bourse will, while further strengthening the supervision and punishment of directors, supervisors and senior management, intensify supervision over the insiders of the inside information.
The market has been concerned about the recent illegal trading of shares in some listed companies by their directors, supervisors and senior management such as trading before the disclosure of the semi-annual report and 3rd quarter report of 2009 and during other ban periods for trading of their own companies' shares and the short-swing trading. Regarding such conducts, the SSE stresses that the purchase and sale of shares in listed companies by their directors, supervisors and senior management shall be in strict accordance with the requirements of the "Company Law", the "Securities Law", the "Management Rules of Shares Held by Directors, Supervisors and Senior Management of Listed Companies and These Changes" released by the China Securities Regulatory Commission (CSRC) and other laws and regulations.
The SSE had previously improved the prior and post supervision over the trading of shares in listed companies by their directors, supervisors and senior management by specially formulating the operation procedure, joining hands with Shanghai Branch of China Securities Depository and Clearing Corporation Limited (SD&C Shanghai Branch) to use relevant technical methods and making specific supervisory arrangements for the management and change of shareholding of listed companies' directors, supervisors and senior management.
The SSE requires the listed companies to report the basic information and declarations of their directors, supervisors and senior management on the listing day and within two days after the changes of relevant information of directors, supervisors and senior management. In addition, the SSE conducts the classified supervision by the following methods. Firstly, prior supervision is conducted over such situations as that the directors, supervisors and senior management shall not transfer the shares in their own companies within one year after their companies' stocks are listed and traded and within half a year after their resignations, and that the shares transferred by the directors, supervisors and senior management every year within their tenures shall not exceed 25% of the total shares in their companies held by them. The SSE and SD&C Shanghai Branch conduct prior control by lock-up in advance. However, as the B-share system does not support lock-up in advance for now, the SSE still conducts post supervision over the shareholding lessening of B shares by the directors, supervisors and senior management.
Secondly, post supervision is conducted over the short-swing trading in violation of Article 47 of the "Securities Law", such as selling the shares in the company within 6 months after the purchase, or vice versa.
Thirdly, post supervision is conducted over the violation of the ban period for shares trading (such as within 30 days before the listed companies' periodical reports are announced, within 10 days before the listed companies' performance prediction or express on performance are announced, or from the day when a significant event that may have significant influence on the trading price of a company's shares occurs or from the decision process of the significant event to within 2 trading days after the lawful disclosure and other periods specified by the SSE), the promises made by the directors, supervisors and senior management of not transferring the shares within a certain period and the specific restrictive measures stipulated by some listed companies in their Articles of Association. Therefore, after the disclosure of the annual reports and semi-annual reports every year, the SSE will examine whether the listed companies' directors, supervisors and senior management conduct illegal shares trading. According to the examination result, the bourse will express surveillance attention to relevant personnel or report them to its Disciplinary Committee for disciplinary punishment. In case any listed company with significant event is suspected of trading during the sensitive period, the SSE's Company Management Department will provide the information of the company's directors, supervisors and senior management to the SSE's Market Surveillance Department, which will verify relevant information and cooperate in imposing relevant disciplinary sanction on the violations of relevant personnel.
According to statistics, as of October 2009, the SSE had imposed punishment on 45 directors, supervisors and senior management of listed companies this year for their illegal trading such as violations of ban period for shares trading, short-swing trading and failure to disclose in time the shares trading information on the website of the SSE. Based on the amount and seriousness of illegal trading by relevant responsible persons, the bourse had expressed surveillance attention to 19 people and taken disciplinary measures of criticizing 26 people in circulars upon discussion and approval by the SSE's Disciplinary Committee. Concerning the illegal conducts of some companies resulting from incorrectly reported or untimely updated information of the directors, supervisors and senior management, the SSE had expressed surveillance attention to and criticized the responsible Secretaries to Directorate of listed companies in circulars.
What's more, to better publicize the rules on shares trading by listed companies' directors, supervisors, senior management and relevant shareholders, the SSE's Company Management Department worked out the "Q & A on Norm of Shares Trading by Listed Companies' Directors, Supervisors, Senior Management and Shareholders" in July 2009. The bourse requires Secretary to Directorate of each listed company to convey the norm to all directors, supervisors, senior management and relevant shareholders in time and to urge them to follow relevant rules. In September, the SSE's Company Management Department issued the "Notice of Urging Listed Companies' Directors, Supervisors, Senior Management and Shareholders to Strictly Observe Rules of Shares Trading". According to the notice, such reasons as the directors, supervisors and senior management "incorrectly operated", "didn't know relevant rules", "entrusted others with the account management" and "were in the dark about" the trading can not free them from the responsibility of illegal trading. Also, the listed companies shall, by regularly organizing their directors, supervisors and senior management to study the regulatory documents of stock trading, urge them to understand and observe relevant rules and to conduct stock trading according to the rules. In case of the illegal shares trading by the directors, supervisors and senior management, while the Secretary to Directorate of a company fails in his or her duty, the SSE will include the case as part of the annual appraisal of Secretary to Directorate apart from severely punishing relevant responsible personnel. Besides, the SSE also organized its staff to give lessons to directors, supervisors and senior management at the trainings held by regional regulatory bureaus of the CSRC. It is expected to further standardize the shares trading of listed companies' directors, supervisors and senior management by explaining the norm of shares trading and discussing the training methods of lawful trading.
According to an SSE official, the bourse will intensify the supervision and punishment by continuously conducting regular or unscheduled examination on the shares trading by listed companies' directors, supervisors and senior management. The SSE will also strictly supervise the insiders of the insider information to urge listed companies' directors, supervisors and senior management to observe the rules on shares trading.
