Name: Supplementary Provisions on the Criteria for the Prosecution of Economic Crimes (《关于经济犯罪案件追诉标准的补充规定》, the “Supplementary Provisions”)
Issuing authority: The Supreme People’s Procuratorate of the PRC and the Ministry of Public Security
Effective Date: 5 March 2008
Subject: Information disclosure; manipulation of the securities or futures market; misappropriation of client assets
The Supplementary Provisions supplement the Provisions on the Criteria for the Prosecution of Economic Crimes issued by The Supreme People’s Procuratorate of the PRC and the Ministry of Public Security on 18 April 2001 (the “Provisions”), to reflect the significant changes in the market conditions in the growing Chinese economy, especially in the financial sector, since the issue of the Provisions. The Supplementary Provisions demonstrate the determination of the regulators to ensure that the legislation is in line with the changes in the marketplace and to further combat crimes relating to the securities and futures industry.
- Non-compliance with disclosure requirements and non-disclosure of material information: the Supplementary Provisions set out the circumstances under which prosecution shall be made under Article 161 of the Criminal Law. These circumstances include non-compliance with disclosure requirements or non-disclosure of material facts which (i) cause shareholders, creditors or other parties to suffer a direct loss exceeding RMB500,000 in aggregate, or (ii) result in a false increase or reduction of assets or profits representing more than 30% of the total disclosed assets or profits.
- Damaging the interests of a listed company as a result of the breach of fiduciary duties: the Supplementary Provisions set out the types of breach of fiduciary duties which require prosecution under Article 169(1) of the Criminal Law. Directors, supervisors, senior management personnel, controlling shareholders and actual controllers of a listed company may be prosecuted. For most of the specified breaches, the threshold for prosecution is RMB1,500,000 of direct loss caused to the relevant listed company.
- Insider dealing and leakage of insider information in securities and futures trading: the Supplementary Provisions set out five circumstances under which prosecution is required to be made under Article 180 of the Criminal Law. These circumstances include insider dealing or leakage of insider information resulting in a cumulative gain or an avoidance of loss in excess of RMB150,000.
- Manipulation of the securities or futures market: the Supplementary Provisions set out the circumstances under which prosecution should be made under Article 182 of the Criminal Law. These circumstances include (i) the trading of securities/futures above a specified volume while holding or actually controlling such securities/futures above a certain amount, and (ii) the conduct of trades between accounts controlled by the same investor above a specified volume.
- Misappropriation of entrusted assets: the Supplementary Provisions set out three circumstances under which prosecution shall be made under Article 185(1)(i) of the Criminal Law. These circumstances apply to financial institutions, such as commercial banks, securities companies, futures companies and insurance companies. The circumstances covered include (i) the misappropriation of entrusted assets exceeding RMB300,000 in aggregate, and (ii) the repeated misappropriation of the entrusted assets of a single client, or the misappropriation of the entrusted assets of multiple clients, even if the RMB300,000 threshold has not been satisfied.
Please contact Zili Shao ( firstname.lastname@example.org tel: +86 21 2891 1868) or Fang Jian ( email@example.com tel: +86 21 2891 1858) if you would like further details.