Circular on Issuing the 10th Batch of Guiding Cases of the Supreme People's Procuratorate
Circular on Issuing the 10th Batch of Guiding Cases of the Supreme People's Procuratorate
Circular on Issuing the 10th Batch of Guiding Cases of the Supreme People's Procuratorate
July 3, 2018
The People's Procuratorates of all provinces, autonomous regions and municipalities directly under the Central Government, the Military Procuratorate of the People's Liberation Army and the Production and Construction Corps Branch of the People's Procuratorate of Xinjiang Uygur Autonomous Region,
The 2nd Session of the 13th Procuratorial Committee of the Supreme People's Procuratorate hereby decided on June 13, 2018 to issue three guiding cases (Procuratorial Guiding Cases No. 39 to No. 41), including the one concerning Zhu Weiming's manipulation of the securities market, as the 10th batch of guiding cases for reference and application.
Case of Zhu Weiming's Manipulation of the Securities Market (Procuratorial Guiding Case No. 39)
[Key Words]
Manipulation of the Securities Market; "Scalping"; Public Recommendation of Stocks
[Basic Facts]
The defendant, Zhu Weiming, male, born in July 1982, was a former stockbroker of Shanghai Longhua W. Road Securities Sales Department of China Development Bank Securities Co., Ltd. (hereinafter referred to as the "Securities Sales Department") and a special guest of the Stock Discussed Program on CBN of Shanghai Television Station (hereinafter referred to as the "Stock Discussed").
From February 1, 2013 to August 26, 2014, when acting as a stockbroker of the Securities Sales Department, the defendant Zhu Weiming used three securities accounts under his control to buy several stocks before the Stock Discussed, of which he was a special guest, was broadcast; offered a public evaluation, forecast and recommendation of the stocks he bought as a special guest when the Stock Discussed was broadcast on the same or next day; and sold relevant stocks in one to two trading days after first broadcasting the Stock Discussed, by which the defendant artificially manipulated the volumes and prices of the aforesaid stocks and gained profits therefrom. It was detected that the transaction amount of the stocks he bought was more than CNY20,942,200, and that of the stocks he sold was more than CNY21,697,000; thereby the defendant gained the illegal profits of more than CNY754,800.
[Keystone]
Any securities company, or securities consulting agency, professional intermediary and any employee thereof, who buys, sells and possesses securities in violation of the "vocational prohibition" provision, performs a reverse operation and gains profits by virtue of the expected market fluctuations after making a public evaluation and forecasting or providing investment proposals with respect to relevant stocks, shall be subject to criminal liability as a crime of securities market manipulation.
[Crime Charging and Proving]
On November 29, 2016, Shanghai Public Security Bureau transferred Zhu Weiming to No. 1 Branch of the Shanghai Prosecution Service for examination of the indictment for the suspected crime of stock market manipulation.
At the stage of examination of the indictment, Zhu Weiming argued that 1) the securities accounts concerned were actually under the control of his father, and he neither provided any advice nor took part in buying or selling the relevant stocks concerned; 2) when the Program was broadcast, the name and code of any stock concerned were concealed, and Zhu Weiming only showed the K charts and described the charactristics and information of the stocks, so it did not constitute a public evaluation, forecasting and recommendation of stocks; 3) the funds in the securities accounts concerned were family common property, and he did not derive any benefit therefrom.
The Procuratorate deemed after examination that the existing evidence was enough to determine that the suspect recommended stocks publicly on media and that reverse operation of the stocks concerned in the securities accounts concerned was conducted prior to and after the public recommendation; however, some issues should be further verified, including the actual control relationship between the suspect and the securities accounts concerned, whether public recommendation constituted "public recommendation of stocks" as mentioned in "scalping" and whether the defendant's acts could be identified as "manipulation of the stock market". Therefore, with respect to the issues to be further verified, No. 1 Branch of the Shanghai Prosecution Service twice returned the case to the Shanghai Public Security Bureau for supplementary investigation respectively on January 13, 2017 and March 24, 2017, requiring the Public Security Bureau to carry out supplementary investigation of the suspect's IP addresses for Taobao and Internet banking and MAC addresses (the hardware device addresses, to define the location of network devices), and make a screening comparison with the IP address for the transactions in the securities accounts concerned; to make a relevance comparison of the inflow and outflow of funds in the securities accounts concerned with the movements of funds in the suspect's personal accounts; to further inquire of the suspect's father about key details in order to check the suspect's arguments; and, the securities regulatory department should put forward its opinions whether the acts committed by the suspect constituted "public recommendation of stocks" and "manipulation of the stock market".
Through supplementary investigation, the Shanghai Public Security Bureau further collected some evidence including the witness testimonies of Zhu Weiming's father, the Confirmation Letter issued by the China Securities Regulatory Commission ("CSRC") concerning the nature of Zhu Weiming's manipulation of the stock market, and the verified written opinions issued by the judicial accountant. The Confirmation Letter issued by the CSRC confirmed that, from February 1, 2013 to August 26, 2014, Zhu Weiming made a public evaluation and forecast of 15 stocks by means of express indication of the stock names or description of the stock characteristics in the Stock Discussed. Zhu Weiming bought the stocks recommended in the amount of more than CNY20,942,200 with the three securities accounts under his control on the date of broadcasting or one or two trading days in advance, and sold the aforesaid stocks in the amount of more than CNY21,697,000 within one or two trading days of the date of broadcasting; thereby Zhu Weiming gained the profits of more than CNY754,800. The stocks recommended by Zhu Weiming had an obvious increase of transaction prices and volumes on the next day, deviating from the trends of the industry sector and the market. Thus, what Zhu Weiming did constituted manipulation of the stock market, disturbed the securities market order and had a serious social impact.
No. 1 Branch of the Shanghai Prosecution Service interviewed Zhu Weiming again in terms of the evidence collected during supplementary investigation and heard the opinions of his lawyer. When he faced the evidence, Zhu Weiming admitted to making a public recommendation of stocks on the Program and said that he knew that the prices of the recommended stocks would rise after the Program was broadcast, so he suggested his father buy 15 stocks concerned prior to his public recommendation and sold them after the broadcast in order to gain benefits. However, Zhu Weiming denied the facts based on which Zhu Weiming was charged with buying and selling the stocks with the securities accounts under his control.
As to Zhu Weiming's argument, the personnel handling the case produced relevant evidence to Zhu Weiming and his lawyer and expounded the causal link between such evidence and Zhu Weiming's acts one by one: 1) most of the IP addresses for account login and transactions were in Zhu Weiming's office, which were identical to Zhu Weiming's travel paths and computer data tracks. For example, on July 17 and 18, 2014, IP addresses for login and transactions of Zhu Weiming's securities accounts concerned were in Chongqing, identical to Zhu Weiming's travel records; 2) funds transfers between the three securities accounts concerned and Zhu Weiming's personal accounts were frequent; initial funds in the three securities accounts were in part from Zhu Weiming's personal accounts, and some funds transferred from the three securities accounts were remitted to Zhu Weiming's personal accounts and spent by Zhu Weiming afterwards, all of which could prove that the funds in the three securities accounts were under Zhu Weiming's control. When confronted with the aforesaid evidence, Zhu Weiming finally confessed to the facts that he carried out the "scalping" to manipulate the buying and selling of stocks with another person's securities accounts in order to gain benefits.
On May 18, 2017, No. 1 Branch of the Shanghai Prosecution Service filed an indictment with Shanghai No.1 Intermediate People's Court against the defendant Zhu Weiming for the crime of manipulation of the securities market. On July 20, Shanghai No.1 Intermediate People's Court held a public trial of the case.
At the stage of court investigation, the public procurator read the indictment, accusing the defendant Zhu Weiming of manipulating the securities market by means of "scalping" to gain benefits in violation of the "vocational prohibition" provision and claiming that those acts constituted the crime of manipulation of the securities market. The public procurator produced four sets of evidence to prove the facts of the crime alleged above:
Firstly, the evidence concerning the subject identity of the defendant Zhu Weiming, including 1) the labor contract, the agency contracts and other documentary evidence concerning the working relationship between China Development Bank Securities and Zhu Weiming; 2) the testimonies of the witnesses, including Chen, an editor of the Stock Discussed; 3) household registration information, the qualification certificate and other documentary evidence; and 4) the statements of the defendant Zhu Weiming. The evidence could prove that Zhu Weiming had been invited to act as a special guest of the Stock Discussed several times from February 2013 to August 2014 when he was a stockbroker of the Securities Sales Department.
Secondly, the evidence concerning the login abnormality of the securities accounts concerned, including 1) the testimonies of Witness Zhu and other witnesses; 2) Zhu Weiming's records on entry & exit and domestic trips, as well as other documentary evidence; 3) the verified written opinions of the judicial accountant and written search records, etc.; and 4) the statements of the defendant Zhu Weiming. The evidence could prove that the defendant Zhu Weiming was the actual controller of the three securities accounts concerned registered in the name of another Zhu, Sun and Zhang from February 2013 to August 2014.
Thirdly, the evidence concerning the transaction abnormality of the securities accounts concerned, including 1) the testimonies of Witness Chen and other witnesses; 2) the written Decision of Administrative Penalty, relevant confirmation opinions and investigation reports issued by the CSRC and other documentary evidence; 3) the verified written opinions of the judicial accountant; 4) copy discs of the Program videos, chat records of QQ groups, and other audio-visual materials and electronic data; and 5) the statements of the defendant Zhu Weiming.
......
July 3, 2018
The People's Procuratorates of all provinces, autonomous regions and municipalities directly under the Central Government, the Military Procuratorate of the People's Liberation Army and the Production and Construction Corps Branch of the People's Procuratorate of Xinjiang Uygur Autonomous Region,
The 2nd Session of the 13th Procuratorial Committee of the Supreme People's Procuratorate hereby decided on June 13, 2018 to issue three guiding cases (Procuratorial Guiding Cases No. 39 to No. 41), including the one concerning Zhu Weiming's manipulation of the securities market, as the 10th batch of guiding cases for reference and application.
Case of Zhu Weiming's Manipulation of the Securities Market (Procuratorial Guiding Case No. 39)
[Key Words]
Manipulation of the Securities Market; "Scalping"; Public Recommendation of Stocks
[Basic Facts]
The defendant, Zhu Weiming, male, born in July 1982, was a former stockbroker of Shanghai Longhua W. Road Securities Sales Department of China Development Bank Securities Co., Ltd. (hereinafter referred to as the "Securities Sales Department") and a special guest of the Stock Discussed Program on CBN of Shanghai Television Station (hereinafter referred to as the "Stock Discussed").
From February 1, 2013 to August 26, 2014, when acting as a stockbroker of the Securities Sales Department, the defendant Zhu Weiming used three securities accounts under his control to buy several stocks before the Stock Discussed, of which he was a special guest, was broadcast; offered a public evaluation, forecast and recommendation of the stocks he bought as a special guest when the Stock Discussed was broadcast on the same or next day; and sold relevant stocks in one to two trading days after first broadcasting the Stock Discussed, by which the defendant artificially manipulated the volumes and prices of the aforesaid stocks and gained profits therefrom. It was detected that the transaction amount of the stocks he bought was more than CNY20,942,200, and that of the stocks he sold was more than CNY21,697,000; thereby the defendant gained the illegal profits of more than CNY754,800.
[Keystone]
Any securities company, or securities consulting agency, professional intermediary and any employee thereof, who buys, sells and possesses securities in violation of the "vocational prohibition" provision, performs a reverse operation and gains profits by virtue of the expected market fluctuations after making a public evaluation and forecasting or providing investment proposals with respect to relevant stocks, shall be subject to criminal liability as a crime of securities market manipulation.
[Crime Charging and Proving]
On November 29, 2016, Shanghai Public Security Bureau transferred Zhu Weiming to No. 1 Branch of the Shanghai Prosecution Service for examination of the indictment for the suspected crime of stock market manipulation.
At the stage of examination of the indictment, Zhu Weiming argued that 1) the securities accounts concerned were actually under the control of his father, and he neither provided any advice nor took part in buying or selling the relevant stocks concerned; 2) when the Program was broadcast, the name and code of any stock concerned were concealed, and Zhu Weiming only showed the K charts and described the charactristics and information of the stocks, so it did not constitute a public evaluation, forecasting and recommendation of stocks; 3) the funds in the securities accounts concerned were family common property, and he did not derive any benefit therefrom.
The Procuratorate deemed after examination that the existing evidence was enough to determine that the suspect recommended stocks publicly on media and that reverse operation of the stocks concerned in the securities accounts concerned was conducted prior to and after the public recommendation; however, some issues should be further verified, including the actual control relationship between the suspect and the securities accounts concerned, whether public recommendation constituted "public recommendation of stocks" as mentioned in "scalping" and whether the defendant's acts could be identified as "manipulation of the stock market". Therefore, with respect to the issues to be further verified, No. 1 Branch of the Shanghai Prosecution Service twice returned the case to the Shanghai Public Security Bureau for supplementary investigation respectively on January 13, 2017 and March 24, 2017, requiring the Public Security Bureau to carry out supplementary investigation of the suspect's IP addresses for Taobao and Internet banking and MAC addresses (the hardware device addresses, to define the location of network devices), and make a screening comparison with the IP address for the transactions in the securities accounts concerned; to make a relevance comparison of the inflow and outflow of funds in the securities accounts concerned with the movements of funds in the suspect's personal accounts; to further inquire of the suspect's father about key details in order to check the suspect's arguments; and, the securities regulatory department should put forward its opinions whether the acts committed by the suspect constituted "public recommendation of stocks" and "manipulation of the stock market".
Through supplementary investigation, the Shanghai Public Security Bureau further collected some evidence including the witness testimonies of Zhu Weiming's father, the Confirmation Letter issued by the China Securities Regulatory Commission ("CSRC") concerning the nature of Zhu Weiming's manipulation of the stock market, and the verified written opinions issued by the judicial accountant. The Confirmation Letter issued by the CSRC confirmed that, from February 1, 2013 to August 26, 2014, Zhu Weiming made a public evaluation and forecast of 15 stocks by means of express indication of the stock names or description of the stock characteristics in the Stock Discussed. Zhu Weiming bought the stocks recommended in the amount of more than CNY20,942,200 with the three securities accounts under his control on the date of broadcasting or one or two trading days in advance, and sold the aforesaid stocks in the amount of more than CNY21,697,000 within one or two trading days of the date of broadcasting; thereby Zhu Weiming gained the profits of more than CNY754,800. The stocks recommended by Zhu Weiming had an obvious increase of transaction prices and volumes on the next day, deviating from the trends of the industry sector and the market. Thus, what Zhu Weiming did constituted manipulation of the stock market, disturbed the securities market order and had a serious social impact.
No. 1 Branch of the Shanghai Prosecution Service interviewed Zhu Weiming again in terms of the evidence collected during supplementary investigation and heard the opinions of his lawyer. When he faced the evidence, Zhu Weiming admitted to making a public recommendation of stocks on the Program and said that he knew that the prices of the recommended stocks would rise after the Program was broadcast, so he suggested his father buy 15 stocks concerned prior to his public recommendation and sold them after the broadcast in order to gain benefits. However, Zhu Weiming denied the facts based on which Zhu Weiming was charged with buying and selling the stocks with the securities accounts under his control.
As to Zhu Weiming's argument, the personnel handling the case produced relevant evidence to Zhu Weiming and his lawyer and expounded the causal link between such evidence and Zhu Weiming's acts one by one: 1) most of the IP addresses for account login and transactions were in Zhu Weiming's office, which were identical to Zhu Weiming's travel paths and computer data tracks. For example, on July 17 and 18, 2014, IP addresses for login and transactions of Zhu Weiming's securities accounts concerned were in Chongqing, identical to Zhu Weiming's travel records; 2) funds transfers between the three securities accounts concerned and Zhu Weiming's personal accounts were frequent; initial funds in the three securities accounts were in part from Zhu Weiming's personal accounts, and some funds transferred from the three securities accounts were remitted to Zhu Weiming's personal accounts and spent by Zhu Weiming afterwards, all of which could prove that the funds in the three securities accounts were under Zhu Weiming's control. When confronted with the aforesaid evidence, Zhu Weiming finally confessed to the facts that he carried out the "scalping" to manipulate the buying and selling of stocks with another person's securities accounts in order to gain benefits.
On May 18, 2017, No. 1 Branch of the Shanghai Prosecution Service filed an indictment with Shanghai No.1 Intermediate People's Court against the defendant Zhu Weiming for the crime of manipulation of the securities market. On July 20, Shanghai No.1 Intermediate People's Court held a public trial of the case.
At the stage of court investigation, the public procurator read the indictment, accusing the defendant Zhu Weiming of manipulating the securities market by means of "scalping" to gain benefits in violation of the "vocational prohibition" provision and claiming that those acts constituted the crime of manipulation of the securities market. The public procurator produced four sets of evidence to prove the facts of the crime alleged above:
Firstly, the evidence concerning the subject identity of the defendant Zhu Weiming, including 1) the labor contract, the agency contracts and other documentary evidence concerning the working relationship between China Development Bank Securities and Zhu Weiming; 2) the testimonies of the witnesses, including Chen, an editor of the Stock Discussed; 3) household registration information, the qualification certificate and other documentary evidence; and 4) the statements of the defendant Zhu Weiming. The evidence could prove that Zhu Weiming had been invited to act as a special guest of the Stock Discussed several times from February 2013 to August 2014 when he was a stockbroker of the Securities Sales Department.
Secondly, the evidence concerning the login abnormality of the securities accounts concerned, including 1) the testimonies of Witness Zhu and other witnesses; 2) Zhu Weiming's records on entry & exit and domestic trips, as well as other documentary evidence; 3) the verified written opinions of the judicial accountant and written search records, etc.; and 4) the statements of the defendant Zhu Weiming. The evidence could prove that the defendant Zhu Weiming was the actual controller of the three securities accounts concerned registered in the name of another Zhu, Sun and Zhang from February 2013 to August 2014.
Thirdly, the evidence concerning the transaction abnormality of the securities accounts concerned, including 1) the testimonies of Witness Chen and other witnesses; 2) the written Decision of Administrative Penalty, relevant confirmation opinions and investigation reports issued by the CSRC and other documentary evidence; 3) the verified written opinions of the judicial accountant; 4) copy discs of the Program videos, chat records of QQ groups, and other audio-visual materials and electronic data; and 5) the statements of the defendant Zhu Weiming.
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