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cailianshe reported on september 25 that the china securities regulatory commission recently imposed administrative penalties on a private equity fund manager for a securities violation case.

the china securities regulatory commission issued an administrative penalty decision against tu erfan, the then legal representative, executive director and general manager of shenzhen qianhai haiya financial holdings co., ltd. (a private equity fund manager, hereinafter referred to as haiya financial holdings). the china securities regulatory commission decided to order tu erfan to make corrections, confiscate illegal gains of rmb 33,258,428.79, and impose a fine of rmb 33,258,428.79; at the same time, tu erfan was banned from the securities market for 6 years.

according to the decision, while serving as a senior position in haiya financial holdings, tu erfan used undisclosed information such as the holdings and investment decision-making information of the fund products controlled by him, and conducted convergent transactions by using controlled personal accounts and "haiya financial holdings" accounts, buying 36 stocks in a convergent manner, with a total convergent transaction amount of more than 2.1 billion yuan and illegal gains exceeding 33 million yuan.

the specific illegal facts of tu erfan are as follows:

1. fund practitioner tu erfan was aware of the relevant undisclosed information

tu erfan has served as the legal representative, executive director and general manager of haiya financial holdings since august 2018, and obtained the fund practitioner qualification certificate on september 3, 2018, and his practitioner institution is haiya financial holdings.

"quantum one", "quantum two" and "quantum six" are fund products established under the name of haiya financial holdings. from december 25, 2020 to march 20, 2023, tu erfan was aware of the holdings, investment decision information and other undisclosed information of the "quantum one" and "quantum two" fund products. from july 22, 2022 to march 20, 2023, tu erfan was also aware of the holdings, investment decision information and other undisclosed information of the "quantum six" fund product.

ii. tu erfan’s use of undisclosed information in stock trading

tu erfan controlled and used the "tu erfan" account, the "tu mouming" ordinary securities account and the "haiya financial holdings" account (hereinafter referred to as the controlled account group) and the "quantum no. 1", "quantum no. 2" and "quantum no. 6" fund products (hereinafter referred to as the fund product account group) to continuously engage in similar transactions in the shanghai and shenzhen stock markets, with a high degree of convergence in terms of stock types, trading time, frequency, etc.

from december 25, 2020 to march 20, 2023, the control account group and the fund product account group purchased 36 stocks in a similar manner, with a total similar transaction amount of 216,134.27 million yuan, accounting for 66.67% and 69.25% of the total number of traded stocks and transaction amount respectively. the total profit from similar transactions was 33,258,428.79 yuan.

the decision shows thattu erfan and his agent stated in their defense materials and during the hearing:

first, from the original intention of the legislation, there is no conflict of interest or breach of trust in this case. the source of funds for the individual account group involved in the case is basically the same as that of the fund account group. there is no conflict of interest. the fund investors were aware of it in advance and have issued a letter of exemption. this case is not the object of regulation and crackdown by the legislation. the defendant's behavior does not meet the constituent elements of "trading on undisclosed information". the defendant's behavior did not harm the interests of private equity fund investors, did not violate fiduciary obligations, and did not cause social harm or adverse effects on the securities market. it should not be punished for trading on undisclosed information. in essence, this case is a private equity fund using personal accounts to manage family assets, which is completely inconsistent with the characteristics of trading on undisclosed information.

second, in terms of trading volume, the trading volume of the defendant's personal account group and the fund account group in this case are basically the same. in fact, neither the personal account group transactions nor the fund account group transactions have had a significant impact on the stock price. there is no situation of using the fund's financial advantages to influence the stock price, and it does not constitute trading using undisclosed information.

third, from the perspective of the circumstances, this case is a case where administrative penalties can be waived. the penalty in this case is obviously too heavy. the defendant should not be banned from the market. even if a penalty is imposed in this case, it should be imposed as an institution borrowing an account to buy and sell stocks or using undisclosed information for trading, and the profit from trading using undisclosed information should be calculated from the time the defendant began to work as a fund manager in august 2021.

the decision shows thatafter review, the csrc partially adopted tu erfan's opinions in accordance with the law, and tu erfan's other opinions were not valid, as follows:

first, tu erfan’s behavior in the case constitutes an illegal act of trading using undisclosed information. in this case, fund practitioner tu erfan used the undisclosed information such as the position information and investment decision information of the “quantum one”, “quantum two” and “quantum six” fund products that he knew to control the use of the control account group and the convergent transactions with the “quantum one”, “quantum two” and “quantum six” fund products. this behavior violated the provisions of article 20, item 6 of the “fund law” and article 23, item 5 of the “private placement measures”, and constituted an illegal act as described in article 123, paragraph 1 of the “fund law”. tu erfan’s explanations and reasons such as the source of funds and the issuance of exemption letters by fund investors cannot exempt tu erfan from the administrative responsibility he should bear.

second, the control account group and the fund product account group have continued to engage in similar transactions in the shanghai and shenzhen stock markets, with a high degree of convergence in terms of stock types, trading time, frequency, etc. whether the trading volume of the control account group and the fund product account group is the same does not affect the determination of the use of undisclosed information for trading.

third, there is no situation in which tu erfan is exempted from administrative responsibility in this case. there is nothing wrong with the determination of illegal gains in this case. when imposing a penalty, i will fully consider the facts, nature, circumstances and degree of social harm of the party’s illegal behavior and impose an appropriate penalty.

based on the facts, nature, circumstances and degree of social harm of the party’s illegal acts, the csrc decided to order tu erfan to correct his behavior, confiscate his illegal gains of rmb 33,258,428.79, and impose a fine of rmb 33,258,428.79; and ban tu erfan from the securities market for 6 years.