首页 > Cases > Criminal > 正文
Transactions carried out by Ma Le by Using Undisclosed Information
Resources from:2016 LexisNexis
  
From March 9, 2011 to May 30, 2013, the defendant Ma Le, as securities investment manager of Bosera Selective Stock under Bosera Fund Management Co , Ltd was responsible for the investment of investment funds in stock markets at sole discretion and mastered the underlying stocks, time and quantity of securities investment fund transactions of Bosera Selective Stock and other undisclosed information
Basic Case Facts

From March 9, 2011 to May 30, 2013, the defendant Ma Le, as securities investment manager of Bosera Selective Stock under Bosera Fund Management Co., Ltd. was responsible for the investment of investment funds in stock markets at sole discretion and mastered the underlying stocks, time and quantity of securities investment fund transactions of Bosera Selective Stock and other undisclosed information. During his tenure, Ma Le, by using the said undisclosed information mastered, engaged in the securities transaction activities relating to such information and operated three stock accounts under his control, namely, "Jin X", "Yan X A" and "Yan X B", to make orders through an unregistered Easyown phone card temporarily bought to buy and sell 76 similar stocks (one to five transaction days) prior to, at the same term as or (one to two transaction days) later than the "Bosera Select" Fund Account he managed, realizing the accumulative transaction amount over CNY1.05 billion, and obtaining the illegal profit of CNY18,833,374.74. On July 17, 2013, Ma Le actively surrendered himself to the Shenzhen Municipal Public Security Bureau and faithfully confessed his crime after he appeared in court, which can be deemed as voluntary surrender; Ma Le had a good attitude of confession, refunded the illegal gains from the detained and frozen property and paid the fine imposed in full as well. 

Results of Judgment

The Criminal Judgment (Shen Zhong Fa Xing Er Chu Zi [2014] No.27) of the Shenzhen Intermediate People's Court of Guangdong Province held that the defendant Ma Le's acts constituted the crime of trading by using undisclosed information. However, there is no circumstance specified in the Criminal Law on "particularly serious circumstances" for the crime of trading by using undisclosed information, so Ma Le's acts can be only deemed as "having serious circumstances". A lighter punishment could be imposed on Ma Le due to his voluntary surrender; Ma Le showed repentance through his good attitude of confession, refund of illegal gains in full and payment of the fine in full as well; in addition, upon investigation and evaluation by the department of community correction, emplacement and education under the Judicial Bureau of Futian District, Shenzhen City, the probation declared to Ma Le had no significant bad influence on the community he resided at, which conforms to the conditions for application of probation. Thus, Ma Le was sentenced to a fixed-term imprisonment of three years due to the crime of trading by using undisclosed information with a probation of five years and imposed a fine of CNY18.84 million; the illegal gains of CNY18,833,374.74 were recovered and turned over to the State Treasury in accordance with the law.

After pronouncing the above judgment, the Shenzhen Municipal People's Procuratorate lodged a protest holding that the defendant Ma Le's acts should be deemed as "having particularly serious circumstances of crime" and Ma Le should be punished at the sentencing level of "particularly serious circumstances". The judgment of first instance was wrong in application of the law and obviously inappropriate in sentencing, therefore, it should be changed according to the law.

According to the Criminal Verdict (Yue Gao Fa Xing Er Zhong Zi [2014] No.137) of the Higher People's Court of Guangdong Province, it is specified in Paragraph 4 of Article 180 of the Criminal Law that anyone using undisclosed information for transactions with serious circumstances shall be punished pursuant to Paragraph 1, but Paragraph 4 specifies no circumstance on "particularly serious circumstances" for the crime of trading by using undisclosed information; while according to Paragraph 1 of Article 180, anyone with serious circumstances shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention and/or be fined one to five times the illegal gains; therefore, Ma Le's use of undisclosed information for transactions belongs to the crime with serious circumstances and Ma Le shall be imposed a criminal punishment within such sentencing range. The sentencing of the original judgment is appropriate and the protesting authority's reason for protest is not tenable and would not be adopted. Therefore, the court ruled to reject the protest and uphold the original judgment.

After the verdict of second instance came into force, the People's Procuratorate of Guangdong Province requested the Supreme People's Procuratorate to lodge a protest to the Supreme People's Court according to the trial supervision procedures. The Supreme People's Procuratorate raised a protest holding that all of the provisions concerning punishments in Paragraph 1 should be invoked under the circumstance of invoking the statutory penalty to which Paragraph 4 of Article 180 of the Criminal Law belongs; the violation and liability degree of and the statutory penalty against the crime of trading by using undisclosed information should be equal to those related to the crime of insider trading or disclosing insider information; Ma Le's acts should be deemed as the crime with particularly serious circumstances and a probation applied to him was obviously inappropriate. It was definitely erroneous in applying the law that the final verdict on the case downgraded Ma Le's crime for the reason that there is no provision in Paragraph 4 of Article 180 of the Criminal Law on "particularly serious circumstances" for the crime of trading by using undisclosed information, which caused the inappropriate sentencing and should be corrected according to the law.

The Supreme People's Court formed a collegial panel in accordance with the law for direct retrial of the case and heard the case in public. The facts ascertained in the retrial were basically the same as those in the original trial, but there was a calculation error in the illegal profit of CNY18, 833,374.74 gained by the defendant Ma Le as affirmed in the original trial, and the illegal profit should be CNY19, 120,246.98 in fact and such error should be corrected in accordance with the law. The Criminal Judgment (Xing Kang Zi [2015] No.1) of the Supreme People's Court holds that the original defendant Ma Le's acts constituted the crime of trading by using undisclosed information. It is a particularly serious circumstance that Ma Le used the undisclosed information to trade in 76 stocks with an accumulative transaction amount of over CNY1.05 billion and illegal profit of over CNY19.12 million. In consideration of Ma Le's voluntary surrender by actively returning China from the overseas, which belongs to the statutory circumstance under which a lesser or mitigated punishment shall be given; deposit of cash converted from stocks in three accounts related to the case under the condition of not being controlled and statement of the condition to the China Securities Regulatory Commission, refund of all the illegal gains, good attitude of commitment of crime and repentance, no squander of illicit money and entire performance of the original fine and other circumstances under which a lesser punishment may be given at the discretion, the mitigated punishment might be imposed on Ma Le. The judgment of first instance and the verdict of second instance are clear in ascertainment of facts, accurate and sufficient in evidence and correct in conviction, but they are inappropriate in sentencing due to the wrong understanding of the legal provisions and should be corrected. In accordance with Paragraphs 4 and 1 of Article 180, Paragraph 1of Article 67, Article 52, Article 53, Article 64 of the Criminal Law of the People's Republic of China and Item 3 of Article 389 of the Interpretations of the Supreme People's Court on the Application of the Criminal Procedure Law of the People's Republic of China, the following judgment is rendered: 1. the part of conviction of the original defendant Ma Le in the Criminal Verdict (Yue Gao Fa Xing Er Zhong Zi [2014] No.137) of the Higher People's Court of Guangdong Province and the Criminal Judgment (Shen Zhong Fa Xing Er Chu Zi [2014] No.27) of the Shenzhen Intermediate People's Court shall be maintained; 2. the part of sentence given to the original defendant Ma Le and recovery of illegal gains in the Criminal Verdict (Yue Gao Fa Xing Er Zhong Zi [2014] No.137) of the Higher People's Court of Guangdong Province and the Criminal Judgment (Shen Zhong Fa Xing Er Chu Zi [2014] No.27) of the Shenzhen Intermediate People's Court shall be revoked; 3. the original defendant Ma Le shall be sentenced to a fixed-term imprisonment of three years and a fine of CNY19.13 million due to the crime of trading by using undisclosed information; and 4. the illegal gains of CNY19, 120,246.98 should be recovered and turned over to the State Treasury according to the law.

Reasons for Judgment

In the effective judgment, the court held: this case had clear facts and correct conviction and the focus of dispute was how to correctly understand the invocation of Paragraph 1 by Paragraph 4 of Article 180 of the Criminal Law and how to master the criteria for determination of "particularly serious circumstances" for the crime of trading by using undisclosed information.

I. How to understand and master the sentencing circumstances of Paragraph 1 invoked by Paragraph 4 of Article 180 of the Criminal Law

The crime of insider trading or disclosing insider information is defined in Paragraph 1 of Article 180 of the Criminal Law as follows: "Whoever has or illegally obtains inside information on securities or futures transactions, and prior to the release of the information that involves the issuance of securities, securities or futures transactions or other information that has a material effect on the transaction price of securities or futures, purchases or sells the said securities, engages in the futures transaction related to the inside information, leaks the said information, or explicitly or implicitly advises others to engage in the aforesaid transaction activities, where the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention, and/or be fined one to five times the illegal gains; if the circumstances are particularly serious, shall be sentenced to fixed-term imprisonment of not less than five years but not more than ten years and shall also be fined not less than one time but not more than five times the illegal gains". And the crime of trading by using undisclosed information is defined in Paragraph 4 as follows: "Where any staff member of a stock exchange, a futures exchange, a securities company, a futures brokerage company, a fund management company, a commercial bank, an insurance company or any other financial institution or any staff member of the relevant regulatory authorities or industrial associations uses any undisclosed information obtained by taking advantage of his/her position other than the inside formation to engage in the securities or futures transaction activities related to the said information or explicitly or implicitly advise others to engage in the relevant transaction activities in violation of the relevant provisions, and where the circumstances are serious, he/she shall be punished pursuant to Paragraph 1."

Different understandings exist in judicial practice on how to understand "where the circumstances are serious, he/she shall be punished pursuant to Paragraph 1" in Paragraph 4. One opinion holds that Paragraph 4 only specifies "serious circumstances", but no "particular serious circumstances"; therefore, "where the circumstances are serious, he/she shall be punished pursuant to Paragraph 1" herein can be only subject to the sentencing level of "serious circumstances" in Paragraph 1; another opinion holds that "serious circumstances" in Paragraph 4 are only an incriminating provision, which means that the punishment shall be imposed pursuant to Paragraph 1 in case of the serious circumstances or above. The specific punishment shall be imposed in accordance with the law based on different conditions that are whether the "circumstances are serious" or the "circumstances are particularly serious" in Paragraph 1. Where the circumstances are serious, the offender "shall be sentenced to fixed-term imprisonment of not more than five years"; where the circumstances are particularly serious, the offender "shall be sentenced to fixed-term imprisonment of not less than five years but not more than ten years".

The Supreme People's Court holds that the circumstance specified in Paragraph 4 of Article 180 of the Criminal Law on invocation of the statutory penalty should be the invocation of all the statutory penalties in Paragraph 1, that is, there should be two circumstances and two sentencing levels, namely, "serious circumstances" and "particularly serious circumstances", for the crime of trading by using undisclosed information. The specific reasons for such understanding are as follows:

(I) Such understanding meets the legislative purpose of the Criminal Law. As the transaction acts by using undisclosed information occur frequently in such fields as funds, securities and futures in China, a perpetrator takes huge funds contributed by the public as the support to obtain huge illegal profit by means of buy-in or sale in advance and transfers the risks and losses to other investors, which not only damages the property interest of the entity that he/she works for, but also seriously breaks the principles of openness, impartiality and fairness in the securities market, seriously damages the interests of customer investors or retail investors at a disadvantageous position in terms of information, influences investors' trust in financial institutions due to serious damage to the credit of the financial industry and further causes a serious impact on asset management and the healthy development of markets of funds, securities and futures. For this purpose, the Amendment VII to the Criminal Law of the People's Republic of China adds a new crime of trading by using undisclosed information and specifies such crime, along with the crime of insider trading or disclosing insider information, in the same article, which means that the violation and liability degree of both crimes are equal. "Particularly serious circumstances" should be also applicable to the crime of trading by using undisclosed information.

(II) Such understanding meets the meanings of articles of the law. Firstly, "serious circumstances" in Paragraph 4 of Article 180 of the Criminal Law are an incriminating provision. The Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on Filing and Prosecution of Criminal Cases Governed by Public Security Authorities (II) specify the circumstance criteria for prosecution for the crime of trading by using undisclosed information, which states that such crime can only be prosecuted when reaching a "serious circumstance". The crime of trading by using undisclosed information belongs to a circumstance-based crime; if the legislation needs to clarify the nature of the circumstance-based crime, it shall rely on the expression of "serious circumstances" to avoid the incrimination of acts with "circumstances not serious". Secondly, "serious circumstances" in this paragraph have no nature of a sentencing clause. Though numbers of "serious circumstances" with the nature of conviction clause and sentencing clause exist in the Criminal Law, with no exception, the specific statutory penalties are listed after them. The specific statutory penalties are not listed after "serious circumstances" in Paragraph 4 of Article 180, but those for the crime of insider trading or disclosing insider information are referred to. Therefore, "serious circumstances" in this paragraph only have the nature of conviction cause, but no that of sentencing cause.

(III) Such understanding meets that of the legislative technique for invocation of the statutory penalty. The invocation of the statutory penalty means that no independent statutory penalty is specified for one crime, but that for another crime is invoked as the statutory penalty against such crime. The purpose of invoking the statutory penalty in Paragraph 4 of Article 180 of the Criminal Law is to avoid the repeated expression of articles of the law, which does not fall under the circumstance of ambiguous legal provisions.

In conclusion, though "particularly serious circumstances" are not clearly expressed in Paragraph 4 of Article 180 of the Criminal Law, according to the legislative purpose, meanings of articles of the law and legislative technique, the circumstance of and sentencing level for "particularly serious circumstances" should be involved.

II. Determination criteria for "particularly serious circumstances" for the crime of trading by using undisclosed information

There is no special provision on determination criteria for "particularly serious circumstances" for the crime of trading by using undisclosed information at present; however, considering that the Criminal Law specifies that the punishment for the crime of trading by using undisclosed information refers to that for the crime of insider trading or disclosing insider information, and the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues concerning the Specific Application of the Law in Handling Criminal Cases of Insider Trading and Divulgement of Insider Information determines the transaction amount of over CNY2.5 million, profit of CNY750,000 and other circumstances as the criteria for "particularly serious circumstances" for the crime of insider trading or disclosing insider information, so such criteria shall also apply to the crime of trading by using undisclosed information. Ma Le used undisclosed information for transaction activities with the accumulative transaction amount of over CNY1.05 billion and illegal profit of CNY19.12 million, which greatly exceeded the criteria above, and the said amounts were the largest in such crimes investigated in the State at the time of discovery of the case; Ma Le's criminal circumstance shall be deemed as a "particularly serious" one according to the Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues concerning the Specific Application of the Law in Handling Criminal Cases of Insider Trading and Divulgement of Insider Information.

(Resources from 2016 LexisNexis)