Recently, the Ningbo Securities Regulatory Bureau issued a penalty decision regarding an insider trading case. The penalty shows that Li overheard insider information at an office doorway and subsequently operated his relative's account to purchase shares of Qitian Technology Group Co.,Ltd. (300061.SZ), with a transaction amount of approximately 300,000 yuan and profits of 260,000 yuan.
The administrative penalty decision disclosed the formation and disclosure of insider information. From 2022 to early 2023, Qitian Technology Group Co.,Ltd. sought partners for private placement. In Q4 2023, Wan, the actual controller of Colorful Haoyu, communicated with Han, the investment director of Qitian Technology Group Co.,Ltd.'s controlling shareholder, expressing hopes to find a listed company platform to take some of his industries public.
Around the 2024 Spring Festival, Han approached Wan, proposing that Qitian Technology Group Co.,Ltd. wanted to find a new shareholder, and both parties began contact and negotiations. On April 15, 2024, Han and Wan met to discuss the acquisition of Qitian Technology Group Co.,Ltd. Both parties reached an intention for Qitian Technology Group Co.,Ltd. to introduce Colorful Haoyu's related industries through private placement.
On April 18, 2024, Han sent Wan the "Strategic Cooperation Framework Agreement," which stipulated that Wan or Wan's designated entity would be the target of Qitian Technology Group Co.,Ltd.'s private placement and would promote Wan to become Qitian Technology Group Co.,Ltd.'s largest shareholder and new actual controller. On April 19, 2024, Wan signed the aforementioned Strategic Cooperation Framework Agreement.
On June 5, 2024, Qitian Technology Group Co.,Ltd. held a meeting to preliminarily determine the control transfer plan. On July 25, 2024, Qitian Technology Group Co.,Ltd. convened board of directors and supervisory board meetings to review this transaction. On July 26, 2024, Qitian Technology Group Co.,Ltd. released the "2024 Stock Issuance Plan to Specific Targets" and other announcements, disclosing that Qitian Technology Group Co.,Ltd. would issue shares to Colorful Haoyu through private placement. After completion, Colorful Haoyu would become Qitian Technology Group Co.,Ltd.'s controlling shareholder, and Wan would become the actual controller.
According to relevant regulations, this matter constituted insider information before public disclosure. The insider information formed no later than April 15, 2024, and was disclosed on July 26, 2024.
On April 15, 2024, Li overheard Han and Wan discussing the private placement cooperation at the office doorway. On April 29, 2024, Li operated his relative Liu's Galaxy Securities account to purchase 72,800 shares of Qitian Technology Group Co.,Ltd., with a transaction amount of 303,395 yuan. According to calculations, Liu's account profited 260,022.03 yuan during the insider trading sensitive period.
The above facts are supported by relevant announcements, securities account materials and transaction records, inquiry transcripts, and party acknowledgment records, sufficient for determination.
The Ningbo Securities Regulatory Bureau determined that Li's actions violated Articles 50 and 53, Paragraph 1 of the Securities Law, constituting insider trading behavior as described in Article 191, Paragraph 1 of the Securities Law.
Notably, after the preliminary plan announcement on July 26, 2024, Qitian Technology Group Co.,Ltd.'s stock price surged over 100% in just one week, rising from 4 yuan per share to a peak of 9.37 yuan per share.
**Claims of Not Intentionally Seeking Insider Information**
Li and his representative argued at the hearing and in defense materials that he did not intentionally seek insider information. He accidentally overheard possible cooperation discussions between Wan and Han without knowing specific content. He did not participate in discussions or decisions regarding the private placement acquisition during the insider information formation period. He was responsible for Colorful's operational affairs and did not participate in capital operations. His use of Liu's account for stock trading was to generate profits to subsidize Liu and other relatives. The calculation of illegal gains in this case was incorrect. Using the last-in-first-out method and excluding transaction fees, illegal gains should be 221,356.50 yuan, not 260,022.03 yuan.
After review, the Ningbo Securities Regulatory Bureau concluded that the case facts were clear with sufficient evidence. Li admitted to trading the involved stock after hearing cooperation discussions between Wan and Han, violating Securities Law provisions prohibiting insider trading, warranting legal punishment. The illegal gains calculation was correct and consistent with past enforcement practices.
The case used the "last-in-first-out" method to determine the correspondence between stock sales and purchases when calculating illegal gains, reflecting the impact of insider information on trading behavior and the causal relationship between profits generated and insider information. The illegal gains calculation was appropriate and consistent with regulatory enforcement practices. At the hearing, investigators explained the last-in-first-out pairing calculation process item by item. The calculation process and results were verified as accurate.
The case fully considered Li's truthful statements and active cooperation in the investigation, with the penalty constituting legally mitigated punishment. His reasoning about generating trading profits to subsidize relatives does not constitute grounds for lighter or reduced punishment. The Ningbo Securities Regulatory Bureau did not accept Li's defense arguments.
Ultimately, based on the facts, nature, circumstances, and social harm of Li's violations, the Ningbo Securities Regulatory Bureau decided to confiscate Li's illegal gains of 260,022.03 yuan and impose a fine of 800,000 yuan.
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