Exposure!, There are also "mouse positions" trading | funds | mouse positions

Engaging in related trading activities using unpublished information obtained, exposing a fund manager's "mouse position" together.

Recently, the Zhejiang Securities Regulatory Bureau released an administrative penalty decision, which showed that Liu, a former fund manager of a fund company in Shanghai, was fined 300000 yuan for obtaining undisclosed information related to the managed funds and controlling other people's securities accounts for convergent trading due to his position convenience.

A fund manager was fined for "rat holding"

Convergence trading loss of 365000 yuan

On February 1, 2021, Liu joined a public fund in Shanghai. After joining, he participated in the management of a selected fund in Shanghai, Hong Kong, and Shenzhen, responsible for investment analysis, investment decision-making, and other work of the fund product. He was suspended from his position by the fund company on September 5, 2022.

From February 1, 2021 to September 5, 2022, Liu was informed of research reports, investment strategies, trading targets, trading times, and other undisclosed information related to the Shanghai Hong Kong Shenzhen Selected Fund trading due to his position convenience.

The Zhejiang Securities Regulatory Bureau pointed out that Liu controlled other people's securities accounts to conduct convergent transactions after knowing undisclosed information due to the convenience of his position. Specifically, from the opening of the account on February 24, 2021 to September 5, 2022, the funds in the "Tang Mouqing" Guolian Securities account are Liu's own funds.

From the opening of the account until September 5, 2022, the securities account was ordered and traded by Liu through his mobile phone, and the account was actually controlled and operated by Liu.

After investigation, it was found that the trading of "Tang Mouqing" account is highly similar to the fund it manages. From the opening of the account until September 5, 2022, "Tang Mouqing" Guolian Securities account traded a total of 41 stocks on the Shanghai Stock Exchange, with a transaction amount of 19.7255 million yuan. He also traded 23 stocks with the Shanghai Hong Kong Shenzhen Select Fund under his management, with a transaction amount of 11.7267 million yuan. The number of stocks traded in the same manner accounted for 56.1%, the amount traded in the same manner accounted for 59.45%, and the account suffered a loss of 223280.86 yuan in the same trading.

The Hebei Securities Regulatory Bureau pointed out that after calculation, Liu used the "Tang Mouqing" account to make a total transaction amount of 17.7024 million yuan in convergent transactions, resulting in a total loss of 365095.09 yuan in convergent transactions.

The above illegal facts are sufficient to be determined by evidence such as records of inquiries from relevant personnel, securities account trading records, appointment and removal documents, and explanations of the situation.

Liu, due to his position, gained knowledge of undisclosed information and controlled other people's securities accounts to engage in convergent trading. The above behavior violates the provisions of Article 20 (6) of the Securities Investment Fund Law and constitutes the illegal act referred to in Article 123 (1) of the Securities Investment Fund Law.

Not accepting arguments

Impose a fine of 300000 yuan

The administrative penalty document shows that Liu also submitted a defense opinion.

Liu proposed in his defense materials: firstly, there was no intentional violation of regulations. Due to a lack of detailed and comprehensive understanding of domestic laws and regulations, this illegal act was committed. Secondly, no illegal benefits have been obtained. Convergence trading and fund trading occur at the same time, and there is no situation where individual accounts benefit from buying stocks in the fund account to raise prices. Thirdly, it did not cause economic losses to investors.

Fourth, have a good attitude towards error correction, actively cooperate with investigations, provide information, etc. Fifth, there is no other illegal behavior. Sixth, corrective measures have been taken. This includes issuing a commitment letter, completing all personal related transactions, resigning from the position of fund manager, etc.

However, the Zhejiang Securities Regulatory Bureau believes that firstly, as a fund practitioner, Liu should learn and comply with fund laws and regulations. Failure to understand laws and regulations cannot be a reason for his exemption. Secondly, the situation of illegal gains, economic losses of investors, attitude towards correction, absence of other illegal behaviors, and corrective actions taken have been fully considered by our bureau when making administrative and quantitative penalties. In summary, Liu's statement and defense will not be accepted.

Based on the facts, nature, circumstances, and degree of social harm of the illegal behavior of the parties involved, and in accordance with Article 123 (1) of the Securities Investment Fund Law, the Zhejiang Securities Regulatory Bureau has decided to impose a fine of 300000 yuan on Liu.

Strict Supervision and Investigation of "Mouse Warehouse" Cases

In recent years, the "rat cage" has been severely cracked down on by judicial institutions.

The China Securities Regulatory Commission (CSRC) has previously pointed out that according to Chinese laws and regulations, it is a serious illegal and criminal act for financial institution employees to engage in securities trading in violation of regulations, disclose undisclosed information or explicitly imply others to engage in related transactions, using other undisclosed information besides insider information obtained through their positions.

Generally speaking, "mouse position" refers to the situation in the stock market where a trader builds a position at a low level with their personal funds before using public funds to raise the stock price. After using public funds to raise the position to a high level, the individual position is sold first and profits are made from it.

"The 'rat warehouse' behavior deviates from the entrusted responsibility, infringes on the interests of the client, undermines the principles of wealth management, and damages the reputation of the asset management industry. It has always been a key area of our inspection and law enforcement," the China Securities Regulatory Commission previously stated.

In terms of laws and regulations, following the Criminal Law Amendment on February 28, 2009, which designated "mouse positions" as a criminal offense, the Securities Investment Fund Law revised on December 28, 2012 explicitly prohibits fund practitioners from "mouse positions", and the supporting regulations such as the "Measures for the Administration of Securities Investment Fund Custody Business" formulated and implemented on April 2, 2013 explicitly prohibit fund custody departments and other practitioners from "mouse positions".

In terms of private equity funds, the Interim Measures for the Supervision and Administration of Private Equity Investment Funds, implemented on August 21, 2014, explicitly prohibit private equity fund practitioners from holding "rat positions".

In the early years, the investigation and punishment of "mouse warehouses" focused on the public fundraising industry, and with the maturity of big data monitoring technology, more and more cases were exposed in other asset management industries. The involved subjects extended to the backend management and technical service personnel of market institutions.

More and more cases of "rat cages" are emerging. Beijing Heda Kaiyuan Investment Director Li Mouwei's total transaction amount reached 5.845 million yuan, with a total loss of 570000 yuan. Insurance asset management, which has always been relatively closed, is also plagued by cases of losses from "mouse warehouses". Former Vice President of Asset Management Department of Zhejiang Commercial Property&Casualty Insurance, with a convergence transaction of over 67 million yuan. In terms of asset management at securities firms, Guo, a former employee of Caida Securities, had a "mouse warehouse" involving 68 stocks, with a total transaction amount of over 160 million yuan and an illegal profit of 23800 yuan.