Under article 76 of the Securities Act of the People’s Republic of China:

An informed person in the securities transaction and a person who unlawfully obtains in-current information shall not sell or sell the company’s securities until such time as they are publicly available, or disclose the information, or propose another person to sell the securities. The provisions of this Law apply to natural persons, legal persons and other organizations that hold or share with others a share of more than five per cent of the company’s shares, as provided for in this Law. The perpetrator shall be liable according to law if the incurrent transaction caused the loss to the investor.

Explanation:

This article is a provision on the conduct of incurrent transactions and their liability.

Under the provisions of paragraph 1 of this article, incurrent transactions are those who know the information in the securities transaction and who have illegally obtained the information in the interior, sell or sell the securities in question before the information is publicly available, or disclose the information, or propose another person to sell it.

The subject of the incurrent transaction, including the informed person of the incuracies of the securities transaction and those who have illegally obtained the incurrent information. The former is the person provided for in article 74 of this Law, which covers a wide range of persons who use improper means to obtain in camera information. For example, a member of a company’s director leaked the inner information to his friend, so that it should be an unlawfully acquired person. Of course, those who have obtained inner information through theft, wiretapping, bribery and extortion are undoubtedly members of this category.

There are three main ways in which curtain transactions are carried out: one is where the subject is aware of the incurrent information on a particular stock and, prior to the publication of the curtain information, is engaged in the sale of the securities. This is the most important manifestation of incurrent transactions. It should be noted here that, in the context of the curtain trade, the perpetrator should sell securities that may be affected by the incurrent information, and that, if an accountant is aware of the information on the financial situation of Company A, he is engaged in the sale of company B’s shares that are unrelated to company A, even though he is a curtain person, this is not an incurrent transaction. The second is that the subject discloses the contained information to others. The disclosure of in-current information is also the result of transactions by a minority using in-current information to obtain undue benefits and that those who usually disclose the information can benefit directly or indirectly. The third is that the subject is aware of the internal information of a particular stock and recommends that another person sell it. This means that the perpetrator did not engage in the trade in securities of his own choosing, nor did he directly describe the contents of the curtain information to others, but rather, using the inscribe information that he or she knows to suggest to others that the sale would be affected by the information.

For the incurrents, whether or not he has a profit-making purpose or motive, whether or not he has used in-currency information to deal with securities, and whether or not he has profited from the transaction, it is considered an in-current transaction.

Paragraph 2 of this article provides that a natural person, legal persons, other organizations that hold or hold, jointly with others, a company holding more than five per cent of its shares shall apply the provisions of this Law, as otherwise provided in this Law. The so-called “consultation” here includes both the holding of a certain stock per person, the holding of more than five per cent of the company’s shares in aggregate, and the holding of part of the company’s stock, but the holding of more than five per cent of the company’s shares by agreement, other arrangements, such as the effective control by company A of B, C, D through investment, agreements, other arrangements, and the holding of more than five per cent of the shares of B, C and D companies in aggregate, in accordance with the conditions referred to in this article, of “joint holdings of more than five per cent of shares”. Marketed company acquisition is an important form of reorganization of business assets by trading in securities for the purpose of obtaining control over listed companies or mergers. For buyers, the prior period of the acquisition is usually carried out under very secret conditions. Purchases, in particular through stock exchanges, which, if prematurely revealed the intent of acquisitions, resulted in an increase in the stock of the acquired company, would significantly increase the cost of acquisitions and even prevent them from proceeding. Under the provisions of this Law relating to the acquisition of a listed company, an investor who maintains 30 per cent of the shares issued by a listed company through a stock transaction on a stock exchange shall be required to make a notice of the purchase by law, whereas a 30 per cent share of the holding is required only to report and make public notices according to law at five per cent of the share held; when an agreement is made to purchase a listed company, the buyer will be required to declare the acquisitions after agreement. This shows that, where an investor buys a publicly listed company, it is possible to sell the shares of the target company before a notice of the acquisition programme is made in accordance with the law. This would be beneficial to the buyer and would facilitate the restructuring of business assets. This is therefore an exception to incurrent transactions in the acquisitions of listed companies.

In the securities market, if an investor suffers damage as a result of a wrongful act, its loss of interest cannot be adequately remedied, it reduces investment and even refuses investment because of loss of confidence, which inevitably hinders capital flows and affects the normal development of the securities market. The pre-revision securities law does not expressly provide for the civil liability for incurrent transactions, but does not prevent the injured party from pursuing the civil liability of the perpetrator under the relevant civil law. This revision of the securities law makes clear the civil liability for in-current transactions, which would make it more conducive for the parties to recover or mitigate through civil proceedings, to tighten sanctions against the perpetrators of in-current transactions and to effectively combat and curtain transactions in the securities market.