The case of Liu Jianyi, a former investment manager at Huatai Asset Management Co., Ltd., who was found guilty of trading on non-public information, has been concluded with both administrative and criminal penalties. On May 15, the Shanghai No. 3 Intermediate People's Court sentenced Liu to five years in prison and imposed a fine of 21 million yuan. This follows an earlier administrative penalty in January 2025 by the Liaoning Securities Regulatory Bureau, which fined him approximately 64.32 million yuan and banned him from the securities market for ten years.
Liu Jianyi, born in November 1986, joined Huatai Asset Management in February 2021. Shortly after beginning to manage asset management products in March 2021, he initiated illicit trading activities that continued until his departure in August 2023. During this period, he managed 15 different products, wielding decision-making authority over stock trades and possessing access to confidential investment plans and trading details.
His illicit operations followed two primary channels. The first involved tipping off an associate, Yang Mouyuan, who then executed trades through a securities account under the name "Jiang Mou" at China Securities Co., Ltd. From March 12, 2021, to August 1, 2023, this account showed a high degree of similarity with the trades in Liu's managed portfolios. It involved 104 overlapping stocks, accounting for 65% of the trades, with a total overlapping transaction value of 1.32 billion yuan and illicit profits of 3.9536 million yuan.
The second, more substantial channel involved Liu's direct participation. He collaborated with Liu Mouyuan (and indirectly with Lu Mouwen) to operate a securities account under the name "Wu Mouling" at Founder Securities Co.,Ltd. Liu Jianyi primarily made the trading decisions, with capital provided by himself and Liu Mouyuan, and profits shared accordingly. This channel involved 113 overlapping stocks (58.25% overlap), with overlapping transaction value reaching 2.043 billion yuan and generating illicit profits of 20.7732 million yuan.
Combined, the total value of overlapping trades across both channels amounted to approximately 3.364 billion yuan, with illegal gains totaling about 24.7268 million yuan. Notably, in the second channel, the overlapping transaction value accounted for about two-thirds of the activity in his managed portfolios, indicating that most of the portfolio trades were mirrored in his personal scheme.
The Liaoning regulator's penalty addressed both aspects: a 2 million yuan fine for tipping off others and the confiscation of 20.7732 million yuan in illegal gains plus a 41.5464 million yuan fine for his direct participation, totaling 64.3197 million yuan. The subsequent criminal sentence added a 21 million yuan fine and a five-year prison term. The court noted that Liu turned himself in in September 2024 and returned part of the illegal gains before trial, leading to a more lenient sentence.
A critical question arises: How did Liu's activities persist for over two years within a firm like Huatai Asset Management? Established in 2005, Huatai Asset Management is a licensed insurance asset manager with a significant third-party asset base. The company publicly states it has implemented five key "firewall" mechanisms—separating investment managers from traders, monitoring communications, dividing investment and risk control roles, independent performance assessment, and separating settlement and accounting functions—along with over 20 internal management rules. Its risk management philosophy emphasizes "full participation, comprehensive coverage, and whole-process management."
Despite these stated controls, Liu's misconduct began almost immediately upon gaining portfolio management authority. This prolonged failure to detect the activity raises questions about the effectiveness of these internal safeguards in practice. Industry observers note that while institutions often attribute such breaches to "individual actions," they are not mere bystanders. Frequent "rat trading" incidents often point to deeper issues like ineffective internal controls, a weak compliance culture, inadequate employee monitoring, and superficial compliance training. Legally, institutions bear a duty of supervision over their employees.
A performance comparison is revealing. During Liu's tenure from early 2021 to mid-2023, the沪深300 index fell by 22%. The illicit accounts under his influence managed a 0.74% return. In contrast, one年金product he managed for about seven months saw its net asset value drop by 5.6%, while the沪深300 index rose nearly 3% during the same sub-period. This stark contrast suggests his personal, illicit trades significantly outperformed the market and the products he was professionally entrusted to manage, which underperformed.
The case underscores the challenges in preventing "rat trading," given its隐蔽性, evolving techniques, and strong profit motives. However, experts argue financial institutions possess the tools for prevention. This includes strengthening internal controls with strict information barriers,全程监控of key processes, using big data to flag anomalous trades, fostering a robust compliance culture through training and case studies, and implementing comprehensive employee behavior monitoring that extends to fund flows and related-party account activities.
The conclusion of Liu Jianyi's case sends a clear message: individuals face severe consequences, but institutions also undergo intense scrutiny of their internal controls. While Huatai Asset Management avoided direct penalties this time, its reputation has been impacted, and it must address the exposed control weaknesses. The case is a stark reminder that upholding fiduciary duty requires constant vigilance and robust systems to intercept risks before they materialize, especially when investment professionals face significant temptations.
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