The key to the conviction of the crime of insider trading and disclosing insider information is to accurately define the insiders, identify the content, formation time, disclosure of insider information, and specific behaviors of insider trading. This article will explore the main defense points of the crime of insider trading and disclosing insider information from the perspectives of the subject of insider trading, insider information, objective behavior, objective evidence, and sentencing based on judicial practice and experience and thinking in handling relevant cases.

1、 Debate on the subject of crime - whether it belongs to an insider or a person who illegally obtains inside information

(1)Even if they know and have dealings with insiders, but have legitimate sources of information, they cannot be identified as illegally obtaining insider information.

In the (2017) Ji 01 Xing Chu No. 102 case, the court found that Hou's trading behavior was indeed abnormal, but based on the overall evidence of the case, it could not be determined that Hou had obtained insider trading information from Lan (an insider) about Longmou Chemical. However, there was evidence to prove that Hou's defense had learned about the possible reorganization of Longmou Chemical from the internet. Therefore, it was determined that he was a person who illegally obtained insider information, and the evidence constituting the crime of insider trading was insufficient. Hou was ultimately acquitted.

(2)There is a dispute as to whether the person who passively obtains inside information belongs to the person who illegally obtains inside information.

The person who passively obtains inside information refers to a person who has subjective knowledge of the nature and source of inside information, except for the close relatives or close relationships of the person who knows the inside information. There are two main views on whether a person who passively obtains inside information should be identified as a person who illegally obtains inside information. Firstly, according to the provisions of the Criminal Law, there are only two types of subjects involved in the crime of insider trading and disclosing insider information, namely, insiders and persons who illegally obtain insider information. Persons who passively obtain insider information do not have the obligation to keep confidential the insider information, and their means of conduct do not have illegality, so they cannot be identified as persons who illegally obtain insider information. Secondly, the legal interests protected by the crime of insider trading and disclosing insider information are the management system of securities and futures trading and the legitimate rights and interests of investors. Whether a person who passively obtains insider information should be recognized as a person who illegally obtains insider information depends on whether the person who passively obtains insider information has the purpose of using insider information to infringe upon these legal interests.

Neither the Criminal Law nor the Interpretation of Criminal Cases Concerning Handling Insider Trading and Disclosing Insider Information (Fa Shi [2012] No. 6, hereinafter referred to as the "Interpretation") explicitly include personnel who passively obtain insider information into the scope of personnel who illegally obtain insider information. The author believes that according to the principle of legality, the person who passively obtains inside information cannot be identified as the person who illegally obtains inside information.

2、 Debate on the Object of Crime

(1)Identification at the time of formation of inside information.

In judicial practice, the occurrence time of the "significant events" listed in Article 80, Paragraph 2, and Article 81, Paragraph 2 of the Securities Law, as well as the formation time of the "policies" and "decisions" specified in Article 81, Paragraph 11 of the Regulations on the Administration of Futures Trading, are generally recognized as the formation time of insider information.

Based on the statistics of punishment decisions published on the official website of the Securities Regulatory Commission in recent years, and taking the administrative penalty case of insider trading related to mergers and acquisitions as an example, the criteria for defining the formation time of insider information mainly include: the date on which both parties reach a cooperation intention; The date of proposal; The date of communication and agreement between the chairmen of both parties; The date of determining the intermediary and participating in the promotion work; The date on which the leader or actual controller of the competent authority knows or agrees; The date of signing the confidentiality agreement and other documents.

The above six defining standards reflect the objective certainty that is the foundation for the application of different defining standards. Therefore, the author believes that the formation time of insider information should be defined with certainty, that is, significant events or important matters have entered a certain substantive operational stage and have a great possibility of realization. The Interpretation stipulates that the initial time of a motion, planning, decision, or execution personnel that affects the formation of insider information should be recognized as the time of formation of the insider information. Due to early legislation and relatively rough and general nature, the boundary between the formation time and the execution time will be infinitely expanded, so it should be used as a special standard and only applicable if it meets the requirements of certainty.

(2)"Failure to disclose information within the sensitive period of insider information does not constitute the crime of disclosing insider information, and failure to conduct insider trading within the sensitive period of insider information does not constitute the crime of insider trading.".

Insider information has certain certainty and significance during the sensitive period from its formation to its disclosure. For example, mergers and acquisitions have entered a certain substantive operational stage and have a high possibility of realization, which reflects the certainty of inside information. On this basis, the significance of inside information, that is, the price sensitivity characteristics, has also been highlighted, reflecting the significant impact of inside information on securities prices. In addition, insider information is confidential, and once leaked, it will affect whether investors are willing to purchase or sell the securities at the current price.

Conversely, if inside information has not yet been formed, such as a company that is still investigating two listed companies, A and B, and has not yet decided which company to implement a strategic restructuring, the relevant information will not have certainty; It is also not significant and cannot be further determined whether this information will have an impact on the price of the securities. In addition, if inside information has been disclosed and is widely known and understood by ordinary investors, it is no longer confidential, and the perpetrator's corresponding transactions after the disclosure of inside information do not constitute the crime of insider trading.

Therefore, during the period before and after the formation and disclosure of inside information, the relevant information does not have confidentiality, certainty, or significance, and is not classified as inside information. Even if the information is disclosed or traded, it does not constitute the crime of insider trading or disclosing inside information.

3、 Debate on Subjective Elements - Negligent Disclosure of Insider Information Does Not Constitute the Crime of Disclosing Insider Information

The husband talks to others on the phone about backdoor listing, while the wife listens intently and recommends buying stocks to others. Does the husband constitute a crime of divulging inside information? "Kuang Yong Case" is the first case of gross negligence in divulging insider information in China's securities market investigated and dealt with by the CSRC. The CSRC has extended the responsibility of divulgers to "negligence", indicating that negligent disclosure of insider information may also be illegal. However, because the Criminal Law clearly stipulates that negligent crimes are only criminally responsible if the law provides for them. The subjective aspect of the crime of insider trading and disclosing insider information is intentional, so negligent disclosure of insider information, even if it is a gross negligence, does not constitute the crime of disclosing insider information.

4、 Debate on Objective Evidence - The probative power and admissibility of the "Confirmation Letter" issued by the CSRC and other relevant departments as evidence

Securities crimes are highly specialized, so when handling cases, public security organs, judicial organs, and others often need relevant professional identification opinions from the CSRC and others to identify issues such as insider information, insiders, price sensitive periods, and trading using insider information as a reference, and rely heavily on such professional identification opinions in the process of handling cases.

Formally, the Confirmation Letter issued by the CSRC does not belong to any of the eight types of evidence specified in the Criminal Law. The content of the "Confirmation Letter" is often reflected in the professional confirmation opinions issued by the CSRC on securities professional issues, which are similar to the appraisal opinions. However, the institution that makes the appraisal opinion must have a certain degree of independence and neutrality, and the appraisal department must have legal appraisal qualifications and appraisers according to law. The "Confirmation Letter" is actually made by the administrative inspection department on the basis of inspection. Self inspection and self evaluation are equivalent to being both an athlete and a referee, which clearly does not comply with the principle of neutrality in appraisal.

In terms of substantive content, it is also necessary to focus on examining the objectivity and relevance of the Confirmation Letter. For example, in combination with the entire case evidence, review whether the facts identified in the Confirmation Letter are objective, true, and comprehensive; Whether the judgment of causality is reasonable; Whether the legal basis is accurate; Whether there is any contradiction or conflict with other evidence in the entire case.

5、 Debate on sentencing

(1)Regarding fines. As for the crime of divulging inside information, generally speaking, the perpetrator does not share the proceeds with the insider trading personnel, so there are no illegal gains. However, courts often impose fines on those who disclose inside information when considering the harmful consequences of their actions. The author believes that the penalty imposed by the court on the person who divulges inside information should not only take into account the amount of profits made by the insider trading personnel, but also consider the size of the role played by the person who divulges inside information and the degree of subjective malignancy. A comprehensive judgment should be made based on common sense, common sense, and common sense. For example, in the first case of disclosing insider information - the Hangxiao Steel Structure case, the insider trading actor Chen Moumou went to inquire about the insider information leaking actor Luo Mou after he had known the insider information from others. Luo Mou did not profit from it, and the court ultimately did not impose a fine on Luo Mou.

In judicial practice, there is no unified standard for calculating fines based on the amount of joint crime or the respective amount of crime in the case of joint crime in insider trading, so it is necessary to clarify it. In general, conviction and sentencing should adhere to the same amount standard, but in joint crime cases, especially those with a large number of joint crime cases, this principle should be amended, otherwise it will inevitably lead to excessive fines and situations where enforcement is simply impossible. It is more consistent with the principle of matching criminal responsibility and punishment to impose fines differently based on full consideration of the role played by the principal and accessory offenders, the degree of participation, the amount of profits, and the magnitude of losses caused.

(2)About social harmfulness. In cases of insider trading and disclosure of insider information, transaction volume and illegal profit (loss avoidance) amount can reflect the degree of social harm of the behavior. In some cases, the transaction amount can best reflect the social harm of the behavior; In some cases, the amount of profit or loss avoidance can most accurately reflect the social harm of the behavior. For example, the situation of losing money and not selling stocks has relatively limited impact on the management order of the securities market, and does not harm the legitimate rights and interests of the majority of investors. Therefore, the social harm is relatively small. It is a circumstance that can be considered as appropriate when sentencing.

(3)Regarding subjective malignancy. For example, in the case of (2011) Xi Xing Er Chu Zi No. 0002, the defendants Du and Liu did not realize that their behavior was a crime of insider trading when they proposed to buy a company's stock. Errors in the actor's understanding of the legal nature and consequences of his or her behavior do not affect the judicial organ's determination of the nature of his or her behavior. However, whether the actor is aware of the crime when committing the behavior reflects the subjective degree of malignancy of the actor, which can be considered at discretion in sentencing.

epilogue

The author introduces the basic situation of the case of insider trading and disclosing insider information through three articles: "Trial Practice of the Crime of insider trading and disclosing insider information: Empirical Analysis Based on 74 Judgments", "Characteristics of the case of insider trading and disclosing insider information", and "Analysis of the defense points of the crime of insider trading and disclosing insider information", analyzes the characteristics of the case, and analyzes the defense points, With a view to revealing the problems existing in judicial practice of this crime, it will be beneficial to handling insider trading and disclosing insider information cases.