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As one of the largest secondary market acquisition plans and the largest cross-border acquisition of domestic enterprises by a foreign company in recent years, Saudi Aramco's investment in Rongsheng Petrochemical (002493.SZ) has attracted enough attention from the market. However, a penalty decision on the official website of the China Securities Regulatory Commission has recently pushed Rongsheng Petrochemical to the forefront.

The decision shows that four people, including Quan Weijun, then deputy general manager of Rongsheng Energy Co., Ltd., Wang Xianpeng, then executive president of Hangzhou Jiusheng Private Equity Fund Management Co., Ltd., Zhou Wenli, then manager of the fund management department of the Financial Management Center of Rongsheng Holdings, and Wu Miaoqin, then deputy director of the President's Office of Rongsheng Holdings, were fined and punished for insider trading in Rongsheng Petrochemical stocks, with a total fine of more than 10 million yuan.

Suspected to be affected by the incident, Rongsheng Petrochemical's stock fell 5.01% during the day and has fallen by more than 18% so far this year.

A reporter from 21st Century Business Herald asked the company's securities representative about the follow-up progress regarding the aforementioned insider trading matter, but has not received a response so far.

At the same time, as of the time of publication, Rongsheng Petrochemical Company has not publicly responded to the suspected insider trading of its employees or the company's improper internal control management.

Involving relatives of the secretary

It is reported that in this notification of the penalty decision, the CSRC fully reported the details including how the parties involved in the case obtained insider information and how they bought and sold stocks through related party accounts.

In this case, Quan Weijun's involvement was relatively typical among the four people, and his close relationship with the company's secretary also attracted much attention.

According to the penalty decision, Quan Weijun served as deputy general manager of Rongsheng Energy Co., Ltd., a subsidiary of Rongsheng Holdings. He is the brother of Quan Weiying, secretary of the board of directors of Rongsheng Petrochemical. The two lived in the same residential area, met and contacted each other frequently, had a close relationship, and contacted each other frequently during the sensitive period of insider information.

On January 4, 2023, Xiang Jiongjiong, general manager of Rongsheng Petrochemical, established the "Saudi Aramco Equity Agreement" WeChat group, and Quan Weiying was one of the group members, proving that he knew the insider information no later than January 4, 2023.

Subsequently, Rongsheng Petrochemical promoted the equity acquisition from late January to early March and finalized the details of the agreement, including determining the direction and terms of the agreement for a package of strategic cooperation such as crude oil, chemicals and share trading; including finalizing the payment process and method, and discussing announcements and board matters with intermediary institutions.

Finally, after the close of trading on March 27, Rongsheng Petrochemical issued a "Notice on Changes in Equity Regarding the Introduction of Strategic Investors and the Agreement Transfer of Part of the Company's Shares by the Controlling Shareholder."

However, the reporter noticed that even before the information was released, Rongsheng Petrochemical suddenly jumped on March 27, closing up 7.92%.

Next, Rongsheng Petrochemical's stock price in the secondary market hit the daily limit on March 28 and 29, but then broke down and fell. As of today, the stock price has been halved.

The CSRC also disclosed that Quan Weijun used the ordinary account of "Zhu Moujuan" at Caitong Securities and the credit account of "Zhu Moujuan" at Caitong Securities, and used Quan Weijun's mobile phone number ending in 1866 to place orders. The relevant bank-to-securities transfers were operated using Quan Weijun's mobile phone number ending in 1866, and the source of the transaction funds was Quan Weijun and his mother. At the same time, Lu Mougang admitted that he lent the Guosen Securities account of "Lu Mougang" to Quan Weijun for use. The "Lu Mougang" Guosen Securities credit account traded "Rongsheng Petrochemical" mainly using Quan Weijun's mobile phone number ending in 1866 to place orders. Quan Weijun admitted that the account funds came from him and that the transactions involved were placed by him.

Regarding the authenticity of the insider trading determination, the CSRC also analyzed and pointed out that Quan Weijun had a strong willingness to buy during the sensitive period of insider information. The trading volume was enlarged, which was obviously different from previous trading habits. The trading behavior was obviously abnormal, highly consistent with insider information, and there was no legitimate reason or legitimate source of information.

Reporting a number of typical cases of securities violations

A reporter from 21st Century Business Herald noticed that although the release date of the above case of Rongsheng Petrochemical was marked as June 24 this year on the official website of the China Securities Regulatory Commission, the actual release date is suspected to be August 17 this year.

Although it was delayed for a long time before being "released", the above penalties against the above four parties are also the second round of penalties imposed by the CSRC on the relevant responsible persons and parties of Rongsheng Petrochemical this year.

Previously on May 30, the Zhejiang Securities Regulatory Bureau decided to issue a warning letter regarding the inaccurate performance forecast of Rongsheng Petrochemical.

According to the company's 2023 Annual Performance Forecast, due to inaccurate disclosure of relevant information in the company's performance forecast, the company's chairman Li Shuirong, general manager Xiang Jiongjiong, financial director Wang Yafang, and board secretary Quan Weiying are primarily responsible for the above-mentioned violations. The Zhejiang Securities Regulatory Bureau decided to take supervisory and management measures of issuing warning letters to Rongsheng Petrochemical Company, Li Shuirong, Xiang Jiongjiong, Wang Yafang, and Quan Weiying, and record them in the integrity file of the securities and futures market.

Just before the news of insider trading by the aforementioned four related parties was released, the General Office of the Management Committee of the CSRC released a summary of the administrative law enforcement of the CSRC in the first half of 2024 on August 16, and reiterated the law enforcement concept and policy of "always adhering to the principle of 'having fangs and thorns' and strict supervision and management."

In the CSRC's situation summary, cases involving illegal information disclosure, financial fraud, market manipulation, insider trading, etc., including Pengbo, Huaxun Ark, Zhongli Group, Shanghai Real Estate, Huatie Group, Modern Avenue, Huaying Agriculture, Iceberg Cold and Heat, China National Nuclear Titanium Dioxide, and *ST Jinzhou were highlighted.

Ironically, Rongsheng Petrochemical, which was also subject to a penalty decision in the first half of this year, is not among the typical cases reported in the summary.

The review pointed out that in the first half of the year, the CSRC investigated and handled 489 securities and futures violation cases, made more than 230 penalty decisions, an increase of about 22% year-on-year, punished 509 responsible entities, an increase of about 40% year-on-year, banned 46 people from the market, an increase of about 12% year-on-year, and the total amount of fines and confiscations was more than 8.5 billion yuan, exceeding the total for the whole of last year.

The CSRC also pointed out that it will "consistently" strictly crack down on information disclosure violations such as financial fraud, comprehensively crack down on trading violations such as market manipulation and insider trading, continue to crack down on violations by the "key few" such as actual controllers, strengthen administrative, criminal, and civil accountability, and help increase the cost of violations.

Zhang Xinyuan, head of research at Kefangde Think Tank, said that the punishment of Rongsheng Petrochemical for insider trading reflects the regulator's attitude of cracking down on illegal activities such as insider trading. The incident highlights the regulator's zero-tolerance stance on illegal activities in the capital market, indicating that the regulator will further strengthen supervision, crack down on illegal activities such as insider trading, and maintain market fairness, justice and transparency.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, pointed out that the exposure of this case reflects the regulators' firm determination to maintain the fairness and transparency of the capital market. By publicly disclosing the penalty decision for insider trading cases, the regulators sent a signal to the market to strictly enforce the law and enhance market confidence, and urged companies to strengthen governance, strengthen compliance awareness, improve internal controls, and strengthen accountability.