Changpeng Wan
Key Highlights
The Chongqing Securities Regulatory Bureau imposed unprecedented sanctions for systemic disclosure violations:
– Record 42.5 million yuan penalty for failure to report stake changes
– Use of 24 accounts to conceal ownership exceeding 30% in Wanli Co.
– Decade-long pattern violating multiple securities disclosure requirements
– 3-year market ban prohibiting securities trading
– Mandated public filing of shareholding details within 10 days
The Chongqing Securities Regulatory Bureau has imposed one of the largest individual penalties in China’s securities regulatory history after uncovering deliberate concealment of major shareholdings spanning nearly a decade. Investor Zheng controlled 24 securities accounts amassing over 30% ownership in Shanghai-listed Wanli Co. while deliberately avoiding mandatory disclosure requirements, creating distorted market conditions impacting trading fairness and transaction transparency. This unprecedented case spotlights securities disclosure requirements enforcement at a critical juncture as regulators intensify market oversight.
The Core Violations: Systemic Evasion of Disclosure Requirements
Manipulative Account Structures
From July 7, 2016, to May 26, 2025, Zheng orchestrated transactions through a web of accounts that masked his actual ownership stake. Trading records show the group accumulated 163 million Wanli Co. shares worth 3.17 billion yuan and sold 149 million shares valued at 2.957 billion yuan without filing required reports.
Trigger Threshold Negligence
Chinese securities disclosure requirements mandate reporting:
– Ownership changes exceeding 5% within specified periods
– Subsequent changes exceeding 1% under updated rules
– Mandatory takeover offer initiation at 30% threshold
The investor repeatedly violated all three requirements while continuing active trading.
Regulatory Response: Historic Sanctions
Unprecedented Financial Penalties
The 42.5 million yuan (approximately $6 million) fine comprises:
1. 32.5 million yuan: Restriction period trading violations
2. 5 million yuan: Information disclosure failures
3. 5 million yuan: Avoidance of mandatory acquisition offer
The unified penalty reflects regulators’ determination to impose maximum consequences for deliberate avoidance of securities disclosure requirements.
Market Ban Enforcement</h3
The investor faces comprehensive trading restrictions:
– Prohibition from all securities market transactions through 2028
– Voting rights suspension for unreported shares
– Additional forfeiture of voting privileges for shares acquired above legal thresholds
Legal Framework Breakdown
Violated Provisions
The case cited numerous sections from China’s Securities Law as amended in 2005:
– Articles 38 and 88: Ownership reporting compliance
– Articles 36 and 63: Mandatory offer regulations
– Articles 65 and 186: Transaction restrictions
All committing securities disclosure requirements violations systematically.
Enforcement Mechanisms
Sanctions were levied under:
– Article 197: Information disclosure violations
– Article 196: Acquisition rule breaches
– Article 221: Market entry prohibition powers
Laws referenced include the 2020 Revision of the Administration of Listed Company Acquisitions.
Operational Requirements Imposed
Mandated Disclosure Orders
Within 10 days of receiving the ruling, Zheng must:
– File complete Detailed Beneficial Ownership Change Report
– Notify China Securities Regulatory Commission (CSRC)
– Submit copies to Shanghai Stock Exchange
– Provide documentation to Wanli Co. administration
Restricted Share Management
Regulators enforced special handling for undisclosed holdings:
– Temporary voting right suspension during correction period
– 36-month voting prohibition for shares exceeding undisclosed thresholds
– Permanent record placement in securities industry integrity database
Market Impact Implications
Trading Fairness Concerns</h3
The unreported trades represented:
– 1.6 billion shares transacted covertly
– 31.7 billion yuan financial influence
Resulting in:
– Distorted price discovery mechanisms
– Information imbalance disadvantaging ordinary investors
Regulatory Enforcement Trends
This case signals:
– Prioritization of disclosure requirements enforcement
– Increased crackdowns on multi-account manipulation
– Higher penalties for securities disclosure requirements violations
Compliance Lessons for Market Participants
This record-setting enforcement illustrates critical compliance principles:
Continuous disclosure reporting remains fundamental for even sophisticated market participants. The complexity of governance obligations requires active systems monitoring threshold triggers especially material ownership changes that necessitate prompt reporting as specified under securities disclosure requirements.
Investors established cross-pressure monitoring protocols allocating ownership calculations equity valuation. Financial institutions implement automated disclosure tracking integrating:
– Threshold alert systems
– Centralized ownership dashboards
– Regulatory change updates
All market participants must prioritize transparency maintenance. Whether individual investors institutional funds or corporate entities compliance with securities disclosure requirements protects market credibility ensures fair participation establishes competitive integrity.
Regularly consult official resources like China Securities Regulatory Commission regulatory guidance maintain updated compliance infrastructure ensure trading activities while avoiding catastrophic sanctions demonstrated this landmark case.
