Suspected of transferring shares in violation of restrictive regulations, with a total profit of more than 77.53 million yuan, the actual controller of China Nuclear Titanium Dioxide and two securities firms were heavily fined. With the introduction of the new "National Nine Articles" and a series of supporting policy documents, a number of securities regulatory bureaus have recently intensively deployed related work.
On the evening of April 19, China Nuclear Titanium Dioxide (002145) announced that Wang Zelong, the actual controller of the company, received the "Prior Notice of Administrative Punishment" issued by the China Securities Regulatory Commission. On the same day, Haitong Securities (600837) and CITIC Securities (600030) were also punished for the same problem.
According to the announcement, Wang Zelong received the "Notice of Case Filing" issued by the China Securities Regulatory Commission on April 12, and on suspicion of violating the restrictive provisions of the transfer of non-public issuance of shares in 2023 by China Nuclear Titanium Dioxide, illegal information disclosure and other violations of laws and regulations, according to the "Securities Law of the People's Republic of China", "Administrative Punishment Law of the People's Republic of China" and other laws and regulations, on March 13, the China Securities Regulatory Commission decided to file a case against him.
The China Securities Regulatory Commission said that after investigation, in July 2022, the application for the non-public issuance of A-shares by China Nuclear 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 a six-month lock-up period, and usually take more than a month to withdraw funds and income".
Wang Zelong made an actual 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 No. 1, CITIC CSI did not make an actual profit, CITIC Securities securities lending business income was 1.9107 million yuan, and Haitong Securities income from income swap business was 789,400 yuan.
The above-mentioned illegal facts are proved by evidence such as inquiry records, transaction records, transaction confirmations, explanations, bank account statements, and announcements of listed companies. Based on the facts, nature, circumstances and degree of social harm of the parties' illegal acts, the China Securities Regulatory Commission intends to decide:
In accordance with the provisions of Article 186 of the Securities Law, Wang Zelong, Hong Haowei, CITIC China Securities Capital Management Co., Ltd., CITIC Securities Co., Ltd., Haitong Securities Co., Ltd., and Han Yuchen were ordered to make corrections, given warnings, and confiscated 77.532 million yuan of illegal gains for their illegal acts of transferring shares in violation of restrictive provisions.
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, and Han Yuchen bears 0.5%, that is, 600,000 yuan;
A fine of 35 million yuan was imposed on Hong Haowei and Wang Zelong, CITIC China Securities Capital Management Co., Ltd., CITIC Securities Co., Ltd., Haitong Securities Co., Ltd., and Han Yuchen for the joint illegal act of transferring shares in violation of restrictive provisions, 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, Hong Haowei bears 20%, or 7 million yuan, and CITIC Securities Co., Ltd. bears 15% That is, 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.
The China Securities Regulatory Commission believes that: first, Wang Zelong and Hong Haowei actually participated in the non-public offering through derivatives trading arrangements, and sold securities at market prices, locking in the income from the price difference between the discount price of the non-public offering of shares in advance, and circumventing the restrictions on the sale period in disguise.
Second, CITIC CSI formulated an arbitrage plan, built a trading structure, and provided leveraged financial support for Wang Zelong and Hong Haowei's transfer of stocks in violation of restrictive regulations; CITIC Securities knew that the purpose of securities lending was to provide securities lending services for private placement, and cooperated with them to provide securities lending services; Haitong Securities subscribed for the non-public issuance of shares of CNNC Titanium Dioxide in its own name in accordance with the quotation instructions of CITIC CSI, and objectively helped CITIC CSI and its customers obtain stock returns, so that the private placement arbitrage behavior could be realized; and Han Yuchen came forward to implement the private placement arbitrage plan on behalf of Wang Zelong and others.
Third, in the process of Hong Haowei's transfer of shares in violation of restrictive regulations, Wang Zelong participated in the negotiation of the arbitrage plan for increasing and financing securities, and contacted and suggested that Hong Haowei join the arbitrage.
Fourth, Wang Zelong, as the actual controller of CNNC Titanium Dioxide, concealed his actual participation in the non-public offering through a series of trading arrangements during the non-public issuance of shares by CNNC Titanium Dioxide in 2023, resulting in false records in the report on the issuance of A-shares related to CNNC Titanium Dioxide's non-public issuance.
Recently, the new "National Nine Articles" have made it clear that it is necessary to strengthen the responsibility of the whole chain of issuance and listing, further consolidate the first responsibility of issuers and the "gatekeeper" responsibility of intermediaries, and establish a "blacklist" system for intermediaries. Adhere to the principle of "declaration is responsibility", and strictly investigate illegal issues such as fraudulent issuance.
Liu Biao, a researcher at the Capital Research Center of China University of Political Science and Law, said that the new "National Nine Articles" cover all aspects of the supervision of intermediaries, and at the same time, it emphasizes the need to deepen the coordination and linkage between the central and local governments and ministries, and repeatedly uses expressions such as "resolute correction", "strengthening deterrence warning" and "resolute crackdown". In the future, a "toothy and thorny" and angular regulatory situation will become the norm.
The specific process is as follows:
In September 2022, Wang Zelong decided to implement fixed increase arbitrage, lending securities through the employee stock ownership plan of CNNC Titanium Dioxide, and carrying out over-the-counter derivatives trading 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 discuss the arbitrage business of increasing and lending securities, agreeing that the CNNC Titanium Dioxide Employee Stock Ownership Plan would 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 approximately 88 million non-public 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 transaction of CNNC titanium dioxide, and Hong Haowei participated in and carried out over-the-counter derivatives transactions 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 entered into 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 the corresponding number of shares of 89,864,900 shares, which will be fully margined by CITIC CSI. On the same day, an investment company entered into a vanilla option portfolio contract with CITIC CSI, linked to the underlying "CNNC titanium dioxide" stock, with a nominal principal of 426 million yuan and the corresponding number of shares of 71.9595 million shares, and Fund 1 and CITIC CSI reached a vanilla option portfolio contract, linked to the underlying "CNNC titanium dioxide" stock, with a nominal principal of 89.0398 million yuan and a corresponding number of shares of 15.0405 million 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 entered into a number of short income swaps, with a total of 15.0405 million 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.
Source: Reading and Entrepreneurship