Caixin
Aug 03, 2019 05:02 AM
FINANCE

China Securities Regulator Rewards Whistleblowers in Three Cases

The China Securities Regulatory Commission (CSRC) in 2014 introduced monetary incentive system for individuals exposing securities wrongdoing. Photo: VCG
The China Securities Regulatory Commission (CSRC) in 2014 introduced monetary incentive system for individuals exposing securities wrongdoing. Photo: VCG

China’s securities watchdog rewarded whistleblowers in three cases of violations, the first time the regulator handed out rewards since the monetary incentive system for individuals exposing securities wrongdoing was introduced five years ago.

According to a 2014 rule on reporting violations of securities and futures law, a whistleblower can receive a bounty of 1% of the fine with amounts of more than 100,000 yuan ($14,400) levied on wrongdoers. The total reward shall not exceed 300,000 yuan for major cases.

The China Securities Regulatory Commission (CSRC) didn’t disclose how much reward it gave to the whistleblowers, only the cases on which they tipped off authorities.

One case involved former stock market talk show host Liao Yingqiang, who used his position to manipulate stock prices to his advantage and was fined 129 million yuan.

From March to November 2015, Liao bought 39 stocks which he then recommended on the “Money Talk” show on the China Business News Channel. He sold them at a higher price, netting illicit gains of 43.1 million yuan.

Another case involved construction company Jiangsu Yabaite Technology Co. Ltd., which was fined 600,000 yuan ($90,400) in 2017 for fabricating an overseas contract and overstating revenues and profits.

The company inflated its revenues by 583 million yuan and its profits by 256 million yuan from January 2015 to September 2016 by conjuring an infrastructure project in Pakistan and other nonexistent trade deals, according to the CSRC.

The third case involved web security company Surfilter Network Technology Co. The company failed to disclose stock holdings on behalf of its Chairman Jing Xiaojun during the company’s initial public offering and stock buyback period. The company and Jing were fined 300,000 yuan each.

The rewards will be processed by China Securities Investor Protection Fund Corp., said Chang Depeng, a spokesperson with the CSRC, at a routine press conference Friday.

China’s whistleblower reward system follows similar mechanisms in global markets.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in the U.S. in 2010, a whistleblower who provides original information to the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) that leads to a successful enforcement action resulting in more than $1 million of monetary sanctions may be awarded at least 10% and as much as 30% of the monetary sanctions collected.

The SEC has now awarded about $376 million to 61 individuals since issuing its first reward in 2012. In March, the SEC awarded $50 million to two whistleblowers whose information assisted the agency in bringing a successful enforcement action.

Contact editor Han Wei (weihan@caixin.com)


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