The actual controller of CNNC titanium dioxide took only 37 days from being investigated to receiving the "Prior Notice of Administrative Punishment", and the punishment also exceeded expectations.
China Nuclear Titanium Dioxide (002145) announced in the evening that on April 19, Wang Zelong, the actual controller of the company, received the "Prior Notice of Administrative Punishment" issued by the China Securities Regulatory Commission.
Prior to this, Wang Zelong received the "Notice of Case Filing" issued by the China Securities Regulatory Commission on April 12, 2024, and on suspicion of violating the restrictive provisions of the transfer of China Nuclear Titanium Dioxide's non-public issuance of shares in 2023, illegal information disclosure and other violations of laws and regulations, in accordance with relevant laws and regulations, on March 13, 2024, the China Securities Regulatory Commission decided to file a case against him.
According to the investigation of the China Securities Regulatory Commission, in July 2022, the application for the non-public issuance of A-shares by CNNC titanium dioxide was approved by the Issuance Examination Committee of the China Securities Regulatory Commission. From July to August 2022, CITIC CSI recommended a long-short plan to Wang Zelong, the actual controller of CNNC Titanium Dioxide. According to the plan, "customers can directly realize fixed and short arbitrage through the OTC derivatives trading desk, settle the income in advance, and do not need to wait for the 6-month lock-up period, and usually take more than 1 month to withdraw funds and income".
In September 2022, Wang Zelong decided to implement private placement arbitrage, lending securities sources through the CNNC Titanium Dioxide Employee Stock Ownership Plan, and carrying out OTC derivatives transactions with CITIC CSI in the name of an investment development company (hereinafter referred to as "an investment company"). Han Yuchen specifically implements the arbitrage plan and is responsible for connecting with CITIC CSI and CITIC Securities.
From September 2022 to February 2023, Wang Zelong and Han Yuchen negotiated with CITIC CSI and CITIC Securities to increase the arbitrage business of securities lending, agreeing that the employee stock ownership plan of CNNC Titanium Dioxide would refinance and lend 88 million shares of "CNNC Titanium Dioxide", CITIC CSI would designate four private equity fund product accounts to carry out hedging transactions of "CNNC Titanium Dioxide" stocks, and CITIC Securities would formulate a securities lending plan.
In November 2022, CITIC CSI conducted preliminary communication with Haitong Securities on the income swap business linked to the non-public issuance of shares of "China Nuclear Titanium Dioxide".
In December 2022, the compliance department and the risk management committee of CITIC CSI reviewed and approved the application for over-the-counter derivatives trading linked to the non-public offering of approximately 88 million shares of "CNNC Titanium Dioxide". In the same month, it submitted the "Request for Instructions on the Nominal Principal of 600 Million Yuan of OTC Options Linked to China Nuclear Titanium Dioxide Restricted Shares between an Investment Development Co., Ltd. and China Securities Capital" to the Risk Management Department and the Risk Management Committee of CITIC Securities for deliberation and approval.
In February 2023, due to the insufficient subscription funds of an investment company, in order to use up the quota of securities lending, Wang Zelong suggested that his friend Hong Haowei join the arbitrage trading of CNNC titanium dioxide fixed increase securities lending, and Hong Haowei participated in and carried out over-the-counter derivatives trading with CITIC CSI in the name of a No. 1 private securities investment fund (hereinafter referred to as "No. 1 fund"). From February 8 to February 10, 2023, the Derivatives and Trading Department of Haitong Securities included the "CNNC Titanium Dioxide" stock in the derivatives business alternative database after internal approval of the department, and fulfilled the approval process for the company's seal for the non-public issuance subscription documents of CNNC Titanium Dioxide. On February 10, 2023, Haitong Securities participated in the first round of quotation for the non-public offering of CNNC titanium dioxide in accordance with the CITIC CSI order price and subscription amount, and the issue price was determined to be RMB 5.92 per share on the same day.
On February 16, 2023, Haitong Securities signed a share subscription agreement for the non-public issuance of shares of CNNC Titanium Dioxide, and reached a long-term income swap with CITIC CSI linked to the underlying "CNNC Titanium Dioxide" stock, with a nominal principal of RMB 532 million and a corresponding number of shares of 89,864,900 shares, which will be fully margined by CITIC CSI. On the same day, an investment company reached a vanilla option portfolio contract with CITIC CSI, with a nominal principal of 426 million yuan and a corresponding number of 71,959,500 shares, and a vanilla option portfolio contract with CITIC CSI, with a nominal principal of 89,039,800 yuan and 15,040,500 shares.
From February 6 to February 20, 2023, an investment company and CITIC CSI reached a short income swap linked to the underlying "China Nuclear Titanium Dioxide" stock, with a total of 71,959,500 shares and a corresponding notional principal of 548 million yuan. From February 10 to February 20, 2023, Fund 1 and CITIC CSI reached a number of short income swaps, with a total of 15,040,500 shares and a corresponding notional principal of 114 million yuan.
From February 6 to February 14, 2023, the 88 million shares of "CNNC Titanium Dioxide" held by the CNNC Titanium Dioxide Employee Stock Ownership Plan were allocated to four private equity fund product accounts in accordance with the path designated by CITIC CSI, and the loan period was extended and renewed until September 2023.
From February 13 to February 21, 2023, four private equity fund product accounts sold 88 million shares of "China Nuclear Titanium Dioxide" at an average price of about 7.63 yuan per share, with a turnover of about 671 million yuan. Wang Zelong did not inform the listed company of the information that he actually participated in the non-public offering through the above-mentioned transaction arrangement. On February 24 and March 3, 2023, China Nuclear Titanium Dioxide announced a report on the issuance of A-shares related to the non-public issuance, stating that there was no situation in which the actual controller of the issuer participated in the subscription of the issuance through direct or indirect means.
On March 9, 2023, CNNC Titanium Dioxide announced the listing of this non-public offering of shares, and the stock restriction period is from March 9 to September 8, 2023. From March 17 to April 6, 2023, an investment company and Fund 1 applied to CITIC CSI for early termination of all long vanilla option contracts and short income swap contracts, and CITIC CSI closed the corresponding positions and settled them. In the end, Wang Zelong actually made a profit of 58.162 million yuan through an investment company, Hong Haowei and Wang Zelong made an actual profit of 14.1939 million yuan and 2.476 million yuan respectively through Fund 1, CITIC CSI did not make an actual profit, CITIC Securities securities lending business income was 1.9107 million yuan, and Haitong Securities income exchange business income was 789,400 yuan.
According to the facts, nature, circumstances and degree of social harm of the parties' illegal acts, the China Securities Regulatory Commission intends to decide: to order Wang Zelong, Hong Haowei, CITIC China Securities Capital Management Co., Ltd., CITIC Securities Co., Ltd., Haitong Securities Co., Ltd., and Han Yuchen to make corrections, give warnings, and confiscate 77.532 million yuan of illegal gains, including 60.638 million yuan of Wang Zelong's illegal gains and Hong Haowei's illegal gains 14.1939 million yuan, confiscated 1.9107 million yuan of illegal gains of CITIC Securities Co., Ltd., and confiscated 789,400 yuan of illegal gains of Haitong Securities Co., Ltd.;
Wang Zelong was fined 120 million yuan for the joint illegal act of transferring shares in violation of restrictive provisions with CITIC China Securities Capital Management Co., Ltd., CITIC Securities Co., Ltd., Haitong Securities Co., Ltd., and Han Yuchen, of which Wang Zelong was responsible for 50%, or 60 million yuan, CITIC China Securities Capital Management Co., Ltd. was responsible for 30%, or 36 million yuan, CITIC Securities Co., Ltd. was responsible for 15%, or 18 million yuan, and Haitong Securities Co., Ltd. was responsible for 4.5% That is, 5.4 million yuan, Han Yuchen bears 0.5%, or 600,000 yuan, and Hong Haowei is fined 35 million yuan for the joint illegal act of transferring shares in violation of restrictive provisions by Wang Zelong, CITIC China Securities Management Co., Ltd., CITIC Securities Co., Ltd., Haitong Securities Co., Ltd., and Han Yuchen, of which Wang Zelong bears 30%, or 10.5 million yuan, CITIC China Securities Capital Management Co., Ltd. bears 30%, or 10.5 million yuan, and Hong Haowei bears 20% That is, 7 million yuan, CITIC Securities Co., Ltd. bears 15% or 5.25 million yuan, Haitong Securities Co., Ltd. bears 4.5% or 1.575 million yuan, and Han Yuchen bears 0.5% or 175,000 yuan.
In addition, in accordance with the provisions of the second paragraph of Article 197 of the Securities Law, Wang Zelong was fined 2 million yuan for illegal information disclosure.