1.Illegal issuance of stocks
Case:
A company, under the guise of the "Island Ring Power Generation Air Energy Storage Project", claims to be about to go public on NASDAQ, setting up agent points in 24 provinces and cities to sell the company's original shares through layers of agents. The investment threshold set by Company A is only 25000 yuan, and the declared return to the public can reach up to 20 times. Interested investors can even act as agents to sell equity, and introducing others to invest can immediately receive a 2% rebate.
The China Securities Regulatory Commission (CSRC) found through investigation that the company is actually a shell company, and its issuance of stocks has not been reviewed by the CSRC. After collecting relevant evidence, the China Securities Regulatory Commission will transfer the clues to the Economic Crime Investigation Bureau of the Ministry of Public Security. The public security organs specially deployed personnel to Beijing, Hebei and other places to secretly infiltrate the organization and successfully arrested Zhou, the chairman of the board of directors of Company A, and three other key members suspected of leading illegal activities. In the end, the court sentenced the relevant responsible persons to three years' imprisonment.
Inspiration:
Article 9 of the Securities Law stipulates that the public issuance of securities must meet the conditions stipulated by laws and administrative regulations, and be registered with the securities regulatory authority under the State Council or the department authorized by the State Council in accordance with the law. Without legal registration, no unit or individual may publicly issue securities. The specific scope and implementation steps of the securities issuance registration system shall be stipulated by the State Council.
If any of the following situations occur, it is considered a public offering: (1) issuing securities to unspecified parties; （2） The cumulative issuance of securities to specific targets exceeds 200 people, but the number of employees who implement employee stock ownership plans in accordance with the law is not included; （3） Other issuance activities stipulated by laws and administrative regulations.
In recent years, some companies have issued invitations to the public to subscribe to the so-called "original shares" of the company under the banner of imminent domestic and international listing. Investors should pay attention to identifying several characteristics of illegal securities issuance when making investments:
（1） Issuing without registration or approval from relevant departments;
（2） Publicly promote and distribute;
（3） The cumulative number of shareholders after the transfer to the general public or specific objects exceeds 200.
Criminals often resort to the following methods to achieve their goals:
（1） Establishing shell companies to facilitate illegal activities;
（2） Using a product sold by the company or a project to be invested in as a banner to promote high returns, or using listing domestically and internationally as bait to promote "high-end";
（3） Targeting the general public, especially middle-aged and elderly people;
（4） For the purpose of deceiving money.
According to the relevant provisions of the "Notice of the General Office of the State Council on Strictly Cracking Down on Illegal Issuance of Stocks and Illegal Operation of Securities Business" (Guobanfa [2006] No. 99) and the "Notice of the China Securities Regulatory Commission on Relevant Matters of the General Office of the State Council on Strictly Cracking Down on Illegal Issuance of Stocks and Illegal Operation of Securities Business" (Zhengzhengfa [2007] No. 40), the investigation and handling of illegal securities activities shall be the responsibility of the people's governments of provinces, autonomous regions, municipalities directly under the central government, and cities specifically designated in the state plan in accordance with the principle of territoriality. Those suspected of committing crimes should be investigated and dealt with by the public security organs; If it does not constitute a crime, the securities regulatory department and the industrial and commercial management department shall handle it according to their respective responsibilities.
2、 Fund Promotion
Case:
In January 2021, Li, an employee of a securities business department, illegally promoted products with mismatched risk levels to clients. Li knew that Zhang, a customer of the sales department, was a conservative customer, but in order to boost performance, he vigorously promoted A products with higher risk levels to Zhang and came up with ideas for him, creating the illusion that Zhang's risk assessment met the high-risk level. Subsequently, the net value of Product A plummeted. Zhang complained and reported. Li has been subject to regulatory measures by the local securities regulatory bureau in accordance with the law.
Inspiration:
The promotion of fund products must strictly comply with the "Measures for the Suitability Management of Securities and Futures Investors". Marketing personnel need to comprehensively, truthfully, and objectively state product related information to investors, fully disclose risks, conduct scientific and effective evaluations, and sell or provide appropriate products or services to suitable investors. Regulatory authorities will investigate and punish illegal and irregular behaviors during the fund promotion process in accordance with the law.
3、 Illegal stock recommendation
Case 1:
Wang, under the name of "Hangzhou A Information Service Co., Ltd.", posted "Bull Stock Recommendations" and other messages through mobile phones and WeChat groups, and invited Zhao to join the WeChat group. There are over 100 people in the WeChat group, and more than 90 of them are entrusted by Wang. In WeChat groups, Wang often posts messages such as "having insider information" and "doubling in the short term", which are echoed by the group members, attracting Zhao's attention and enticing him to pay a "membership fee" of 100000 yuan to accept his "stock recommendation service". After Zhao purchased the stocks recommended by him, he not only did not receive high returns, but the stocks were also trapped, so he requested a refund. However, he was told that there was still an elite group that could buy with a certain big shot. In the short term, not only could he break free from the trap, but he could also make a fortune. Zhao paid a membership upgrade fee of 200000 yuan again. Later, when Zhao discovered that he had been deceived and demanded compensation for his losses, Wang's phone stopped working and disappeared without a trace.
Case 2:
Zhang is an old client of a certain securities company and usually has a cautious style. One day, Zhang received a text message on his mobile phone inviting him to join a securities investment WeChat group. Zhang joined the WeChat group with a try it out attitude. Shortly after, the WeChat group released a recommendation to use a "self-developed" stock recommendation software. Zhang requested to try it out for a period of time, and later made a slight profit by using the software. After the probation period ended, the other party told Zhang that becoming a member could provide him with more investment information and high returns, and only required him to pay a membership fee of 50000 yuan in advance. Under the temptation of high returns, Zhang decided to pay a membership fee and invest 300000 yuan to use the other party's "self-developed" stock recommendation software for operation. Soon, Zhang lost 50000 yuan, and with the addition of 50000 yuan in membership fees, the usually cautious Zhang lost 100000 yuan due to a momentary greed.
Case 3:
Sun received a phone call claiming to be from an investment company in Hangzhou, inquiring about Sun's stock trading situation. Sun said he doesn't know how to trade stocks and advised him to entrust his money to their company to operate on his behalf, ensuring a monthly profit of over 50%. After making a profit, he would receive a 37% share and not charge any money. Sun was a bit excited, so he took out 50000 yuan and remitted it to his designated account. Two days later, Sun received a statement from the company via fax, stating that his stock had earned 3000 yuan and that if he invested more capital, he would earn even higher profits. With joy, Zhang transferred another 200000 yuan. In the following period, the company regularly faxed statements to Sun, and at the highest profit point, the market value of the stocks on Sun's account had already reached 400000 yuan. At this moment, Sun thought to himself that there was a risk in the stock market and he had already earned enough money. He suggested that the company sell the stocks and return the cash to him. However, the company always refused for various reasons and eventually refused to answer the phone. Originally, this institution did not have any qualifications related to securities operations, and the reconciliation statements provided to Sun were all forged.
Inspiration:
Criminals often claim to have "insider information" and "financial support", or so-called historical performance and "repeated recommendations and successes" to attract investors' attention, or impersonate legitimate institutions to deceive investors' trust. The so-called securities consulting services provided through the provision of proxy wealth management and promised investment returns are illegal and irregular securities activities, and are not protected by law. Investors should not blindly trust the "professional companies" referred to by the internet or unfamiliar phone calls.
4、 Stock market haters
Case:
Lin serves as a stock analysis guest on the stock investment program of a certain financial channel (television and radio). Lin and Zhu agreed that Zhu would first use his own securities account to buy A-shares and lock them up, and then distribute the profits according to the agreed distribution ratio. Afterwards, in the stock investment column, Lin directly named A stock, described its characteristics in detail, gave a positive evaluation of the stock, and encouraged and implied investors to buy it. Some small and medium-sized investors firmly believe in the analysis of experts in television programs or radio stations, and follow Lin's advice to enter the market. A few days later, Lin vigorously advocated for Zhu to sell his stocks and make profits by selling all of them. Investors took high positions and have been deeply involved in it.
Inspiration:
At present, many financial channels broadcast stock investment programs during prime time, which can easily be used by individual criminals to recommend and speculate on stocks they hold in advance. After investors who do not know the truth buy them, they can cash out at high levels and leave, thus blindly following venture capitalists to stay in high positions. Independent thinking and decision-making are the investment strategies for investors to establish themselves in the securities market. To objectively analyze expert investment advice, have one's own subjective judgment, and avoid falling into the trap of lawbreakers.
5.Off site funding
Case:
Chen, through WeChat QQ、 I have made some "friends" through social networking sites and other means, and these "friends" have invited me to join certain WeChat and QQ groups, where there are "teachers" and "masters" to guide transactions. The "teacher" in the group said that the company can provide capital allocation services, "with a capital allocation of 1-10 times and a leverage operation period of 1-12 months", "ultra-low interest, commission of 22000 yuan, and the ability to fully invest in a single stock to double returns by 100%". Under the guidance of the "teacher", Mr. Chen recharged on the platform and transferred to the personal bank account designated by the other party, or the relevant account of the third party payment platform such as WeChat and Alipay designated by the other party. After recharging and trading for a period of time, Chen lost all his money, and the website was unable to provide brokerage delivery notes or withdraw funds.
Inspiration:
According to relevant regulations, establishing a securities company or conducting securities and futures business requires approval from the China Securities Regulatory Commission and obtaining corresponding business qualifications. Institutions that conduct securities business without obtaining corresponding business qualifications are illegal institutions. Investors should maintain a rational investment mindset, resist the temptation of high returns, and stay away from illegal securities and futures activities.
6.Private placement violations
Case 1:
In 2016, A Asset Management Co., Ltd. issued Fangji No. 5 and Fangji No. 3 securities investment funds. In addition to raising funds from qualified investors, they raised 35.68 million yuan and 7.05 million yuan respectively from unqualified investors such as Zang Mouqun and Chen Mouliang by signing transfer fund share contracts.
The above-mentioned behavior of A Asset Management Co., Ltd. violates the provisions of the Securities Investment Fund Law and the Interim Measures for the Supervision and Administration of Private Equity Investment Funds, which stipulate that private equity funds should raise funds from qualified investors. The China Securities Regulatory Commission has decided to impose a fine of 1 million yuan on A Asset Management Co., Ltd., give a warning to the company's chairman and general manager, and impose a fine of 300000 yuan each.
Case 2:
From 2015 to 2017, B Wealth Management Co., Ltd. provided a unified template for the "Proxy Agreement" to unqualified investors. The unqualified investors and company employee Han signed the "Proxy Agreement", agreeing to purchase company products on behalf of Han. A total of 67.278 million yuan was raised from 240 unqualified investors with investment amounts less than 1 million yuan, and related management fees of more than 510000 yuan were collected. The fund assets were also used for other purposes.
The behavior of B Wealth Management Co., Ltd. raising funds from unqualified investors and misappropriating fund assets violates the relevant provisions of the Securities Investment Fund Law and the Interim Measures for the Supervision and Administration of Private Equity Investment Funds. The China Securities Regulatory Commission has decided to confiscate more than 510000 yuan of illegal gains obtained by B Wealth Management Co., Ltd. and impose a fine of 400000 yuan. Give a warning to the company's executives and impose a fine of 100000 yuan.
Case 3:
In 2015, C Investment Management Co., Ltd. promised not to lose the investment principal when selling quantitative collective wealth management private equity products to investors, and sold the above-mentioned private equity products to five unqualified investors. After the fundraising of the product was completed, C Investment Management Co., Ltd. neither registered the product with the China Securities Investment Fund Industry Association nor properly preserved the relevant information of the private equity business as required.
The above-mentioned behavior of C Investment Management Co., Ltd. violates the relevant provisions of the Interim Measures for the Supervision and Administration of Private Investment Funds. The China Securities Regulatory Commission has decided to give the company a warning and impose a fine of 10000 yuan; And give a warning to the chairman of the company and impose a fine of 10000 yuan.
Inspiration:
Private equity funds must strictly comply with the Securities Investment Fund Law and the Interim Measures for the Supervision and Administration of Private Equity Investment Funds. They are not allowed to promise investors that their investment principal will not be lost or promise minimum returns. They are not allowed to raise funds or transfer fund shares to unqualified investors. They are not allowed to infringe upon or misappropriate private equity fund assets, and it is strictly prohibited for investors to act on their behalf. For illegal and irregular behaviors of private equity funds, regulatory authorities will investigate and punish them in accordance with the law.
7.Foreign Futures
Some institutions promote the so-called "foreign futures" agency business, claiming to provide channels for domestic investors to participate in overseas futures trading, acting as agents for crude oil, gold, stock indexes, foreign exchange and other futures investments in overseas markets such as Hong Kong, New York, London, etc. Some also provide "expert" guidance, "one-on-one teaching", futures matching and other services. Investors only need to provide their identification documents, open an account, and pay relevant fees to conduct "foreign futures" trading through the specific trading software of these institutions.
Case 1:
Li claimed to be an agent of a Hong Kong investment limited company (without a Hong Kong futures business license) and presented the authorization letter of the Hong Kong investment company to investors. Li first established a stock index futures trading website controlled by him, then instructed his employees to guide investors in buying and selling futures to earn a small profit, and gradually asked investors to increase their investment amount, ultimately resulting in a complete loss of margin. In just five months, Li recruited 32 clients and collected 1.31 million yuan in margin from them, causing investors to lose 940000 yuan.
Case 2:
Ke established a company and recruited personnel in the name of the company. Through phone calls, WeChat, and other means, he recruited investors to watch live broadcasts of lecturers analyzing futures market trends. He guided investors to download software and invest in various foreign futures and indices such as gold and crude oil on the overseas "King of New Zealand Financial Trading Platform", and charged investors a transaction fee of about $40 per lot. Salespeople, business team leaders, business managers, lecturers, lecturer supervisors, and other personnel distributed handling fees in different proportions, involving more than 2.7 million RMB. Finally, the court sentenced and imposed a fine for the crime of illegal business operations.
Inspiration:
Attention investors: According to the Regulations on the Administration of Futures Trading, without the approval of the China Securities Regulatory Commission, no unit or individual may establish or indirectly establish a futures company to operate futures business. The China Securities Regulatory Commission has not yet issued any overseas futures brokerage business license to any institution, nor has it issued any measures for domestic units or individuals to engage in overseas futures trading. Secondly, there are strict regulations on the collection of margin for regular futures trading, with a ratio generally ranging from 5% to 15%; Foreign futures often attract investors with extremely low margin ratios, which carry much higher risks than regular futures investments. Thirdly, regular futures companies should operate their clients' margin in a closed manner. Futures companies should open margin accounts at custodian banks specifically for the storage of margin, which should be managed separately from their own funds; However, organizers of foreign exchange trading often fabricate various reasons to require investors to deposit margin into individual accounts.
8.Off exchange stock options
Recently, some Internet platforms have solicited customers through websites, WeChat official account, groups and other means to provide investors with over-the-counter individual stock option trading services. Investors do not need to open securities and futures accounts, nor do they need to conduct video authentication. They can complete registration only by providing ID number number and bank account.
Case 1:
He and others purchased a large number of mobile phones, used WeChat accounts to commit crimes, and added a large number of investors' WeChat accounts, pulling them into the formed WeChat group. Combined with live streaming courses, they first recommended stocks to investors, and then recommended individual stock options to investors based on reasons such as poor market conditions. Investors register an account on a certain trading platform and deposit funds. Under the guidance of the "teacher" in the live broadcast room, they heavily purchase options on the platform. He and others sent screenshots of false profits to investors, deceiving them with the false impression of losses caused by investment failures. The money lost by investors' investments was actually divided between He et al. and the platform in a predetermined proportion.
Case 2:
Mr. Zhang was invited to join a WeChat group by a person claiming to be an employee of Company A. This WeChat group provides free services such as explaining stock knowledge and investment techniques. After a period of "emotional cultivation" and gaining Mr. Zhang's initial trust, relevant personnel began recommending stock option trading to him, claiming that "low risk, high return, small gains, limited losses, unlimited profits", only 50000 yuan can purchase stocks worth 1 million yuan, without the risk of liquidation or forced liquidation, and can obtain high returns in a short period of time. Mr. Zhang couldn't resist the temptation, so he downloaded the trading software based on the link sent by the other party, registered and deposited money. However, during the exercise of the rights, Mr. Zhang found that the premium had not been fully recovered and the remaining funds in his account could not be withdrawn.
Inspiration:
Investors should be aware that these platforms often have inadequate internal control and compliance mechanisms, lack third-party fund custody mechanisms, and pose significant risks and hidden dangers. In addition, these platforms often use misleading promotional terms such as "high leverage", "limited losses but unlimited profits", and "losses do not require replenishment", emphasizing or even exaggerating the returns of individual stock options, weakening or even not indicating the risks of individual stock options. Investors participating in over-the-counter stock option trading through these platforms carry significant risks. If the platforms engage in fraudulent behavior or risk events such as "running away", it will be difficult to protect the rights and interests of investors themselves.
9.Illegal futures trading
In recent years, illegal futures trading activities in the name of commodity spot have been repeatedly banned. These places use the banner of spot trading for oil, gold, silver, and other commodities to persuade customers to trade in a futures like manner with high returns. Some even lure investors into frequent buying and selling to earn huge transaction fees, while others even engage in gambling transactions with investors, causing losses to investors.
Case 1:
Liu, through the introduction of Company C in Shenzhen, signed an agreement with Company B to invest in spot silver on the A precious metal trading platform. After losing over 800000 yuan on platform A, Liu discovered that A, B, and C were suspected of fraud and reported the case to the Shenzhen Public Security Bureau. After investigation, Company B is a member unit of Platform A, and Company C is its agency. Company C searches for target customers in QQ groups and uses phrases such as "one-on-one guidance" and "lucrative profits" to lure customers to trade on Platform A. At present, the court has made a judgment and imposed a fine for the crime of illegal business operation.
Case 2:
Xie, the general manager of a certain electronic trading platform, and related personnel developed so-called "market makers" without authorization, outsourcing some trading varieties and businesses such as xylitol, liquid alkali, glycerin, hydrogen peroxide, formaldehyde, oxalic acid, etc. on the platform. These market makers continue to develop agents downward. They jointly make public marketing through the Internet, WeChat, telephone and other means. Using the backstage data provided by the platform, they first provide "correct information", induce customers to increase investment with small profits, then provide false market information, reverse manipulation of prices, causing investors to lose a lot. The platform, market makers, and agents divided the investors' loss funds proportionally. The relevant personnel were sentenced and fined by the people's court for fraud.
Inspiration:
Attention investors: According to the "Decision of the State Council on Cleaning up and Rectifying Various Trading Venues to Effectively Prevent Financial Risks" (Guofa [2011] No. 38), "Implementation Opinions of the General Office of the State Council on Cleaning up and Rectifying Various Trading Venues" (Guobanfa [2012] No. 37), "Notice on Prohibiting Standardized Contract Trading Activities in the Name of E-commerce" (Zhengzhengfa [2013] No. 74) and other documents, except for the establishment of trading venues engaged in futures trading approved by the State Council or the futures regulatory agency of the State Council in accordance with the law, no unit shall engage in standardized contract trading through centralized bidding, electronic matching, anonymous trading, market makers and other centralized trading methods. In recent years, the inter ministerial joint conference on cleaning up and rectifying various trading venues has coordinated with relevant departments and provincial governments to continue the work of cleaning up, rectifying, and standardizing various trading venues.
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