The Second Handshake Method Of Criminal Law And Securities Law To Improve The Cost Of Illegal Capital Market

The draft amendment to the criminal law (eleven) was recently submitted to the twentieth session of the thirteen NPC Standing Committee for deliberation. What is worth the expectation of the capital market is that the draft of the criminal law amendment (eleven) form a linkage with the new securities law. The draft mentioned the need to increase the penalty for issuing stocks, bonds and the crime of illegal disclosure and non disclosure of important information, clarify the criminal responsibility of controlling shareholders and actual controllers, and raise the cost of illegal and illegal capital market.

Since the implementation of the new securities law, the call for linkage reform between company law and criminal law has become increasingly high. The linkage between the draft criminal law amendment (eleven) draft and the new securities law has also responded to the concerns of the market.

In the recent interview with the media, the chairman of the securities and Futures Commission also mentioned in particular that the number of administrative penalties for financial fraud is not the most important. Subsequent civil recovery and criminal punishment constitute a three-dimensional punishment system, which is more important. The SFC will continue to intensify its efforts to promote the revision of the criminal law, and substantially raise the upper limit and the penalty standard for securities and Futures Crimes, so that the offenders should be held responsible.

In an interview with a reporter at Zhong Lun law firm, he also told reporters: "for a long time, a single law often brings about problems such as the lack of convergence of laws and the difficulty in synchronizing the contents of amendments. This brings many constraints to the implementation of the law. After the implementation of the new securities law, there is obviously such a problem in criminal law and company law. In this case, we should speed up the linkage modification of company law, criminal law and securities law, and establish a consistent legal carrier at the top level of law so as to form effective resultant force.

The second "handshake"

After the implementation of the new securities law, the industry believes that the linkage and amendment of the criminal law is imperative.

Wang Xin, a professor at the Law School of Peking University, said that in December 28, 2019, the Standing Committee of the National People's Congress passed the newly revised Securities Law. One of its recognized highlights is to increase the penalties for the illegal acts of securities, which is embodied in the thirteenth chapter of "legal liability". After enumerating the civil and administrative liabilities of relevant issuers and securities companies, the chapter finally stipulates in the 219th article: "violating the provisions of this law, which constitutes a crime, shall be investigated for criminal responsibility according to law", which is the basis for criminal liability of the securities violator.

He further pointed out: "in China's current" unified "criminal legislation mode, this provision is a subsidiary criminal law of the normative mode, only in a general and abstract way to investigate the criminal responsibility. As for specific charges and statutory sentences, they need to be implemented in criminal law. This will inevitably bring about the linkage modification between the criminal law and the newly revised Securities Law. "

As Wang said, there has been a lagging effect of criminal law. In this case, the same criminal law is not consistent with the securities law, and the standard of criminal law is obviously lighter.

In case of fraudulent issuance, the 181st provision of the new securities law stipulates that the issue of securities has been fined by more than ten percent times the amount of illegally raised funds. Those who are directly in charge and other persons directly responsible shall be fined not less than one million yuan or less than ten million yuan.

The criminal law stipulates that "one percent or more than five percent of the total amount of illegally collected funds should be fined at the same time or in a single place", and the persons directly in charge and other persons directly responsible shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention. We can see that the penalties for fines in the criminal law are obviously lighter.

The above example is not an isolated case. Regarding this, Lou Qiuqin, vice president of the Institute of criminal defense research of Zhongnan University of Economics and Law, pointed out that the penal provision is the most severe means of sanction. In the face of more serious securities crimes than securities violations, the criminal law should have given heavier punishment, but the existing criminal law regulations can not achieve this effect.

Under such circumstances, the "second handshake" between the criminal law and the securities law should come as soon as possible. The industry believes that the crime of establishing a securities crime in the criminal law is a manifestation of the legislative attitude ahead of the criminal law prior to the promulgation of the securities law, and it is the first handshake of the criminal law and the securities law.

How to improve punishment

At present, the specific contents of the penalty increase in the draft criminal law amendment (eleven) are not yet known, but before that, many parties in the market also discussed it.

To raise the cost of breaking the law, it is a simple and direct measure for the public to make a fine. Recently, when the SFC handled some important cases, the low administrative penalty caused a lot of discussions in the market. Therefore, the industry has also proposed that we must raise the illegal economic cost when the criminal law is amended.

Wang Xin pointed out that in China's criminal law, the establishment of fine penalty is more than that of the fines system and the unlimited penalty system. In the 1997 criminal law, the double penalty system was generally reflected in economic crimes, including securities crimes. But later, in order to raise the economic cost of offenders, the penalty amount of the crime such as production and sale of counterfeit drugs was modified, and the fine which was used for "50% times or more than two times the sales amount" was amended to "impose a fine". That is to say, the system is changed from the multiple penalty system to the unlimited penalty system, which means that the judge can break through the amount of the caps in the past, so that the defendant can be punished. We must lose our fortune so as to completely curb the economic driving force of criminals. This is worth referring to when the criminal law fines the securities crime.

In addition to fines, the term of imprisonment is also a matter of great concern. The industry also discussed in many discussions that the current criminal law has set a low prison term for some offenses.

During the two sessions this year, Wang Jianjun, chairman of the Shenzhen Stock Exchange, proposed that the crime of fraudulent issuance in the criminal law was included in the category of "crime of impairing the order of the company and enterprise management". The maximum term of imprisonment was only 5 years, which obviously did not match the social harmfulness, and the prison term of the crime was too low.

He suggested that concealment of important facts or the creation of major false contents in stock issuance documents such as prospectus, subscription warrants, corporate or corporate bond raising methods, issuing stocks or company or enterprise bonds and other securities, with a larger amount and serious consequences, shall be sentenced to fixed-term imprisonment of not more than 5 years or criminal detention; and if the amount is huge, the consequences are serious or other serious circumstances are involved, it shall be in 5 years. Those who are sentenced to not more than 10 years in prison shall be sentenced to fixed-term imprisonment of not more than 10 years, especially those with serious consequences and other serious circumstances. They shall be sentenced to fixed-term imprisonment of not less than 10 years or life imprisonment.

At the same time, Wang Jianjun also suggested that if the controlling shareholder, the actual controller organization, and those who instructed the implementation of the preceding paragraph shall be sentenced to fixed-term imprisonment of not more than 5 years or criminal detention, they shall be sentenced to fixed-term imprisonment of not less than 5 years but not more than 10 years, if the amount is huge, the consequences are serious or other serious circumstances. The amount is especially large, the consequences are especially serious, and other special circumstances are serious, and shall be sentenced to fixed-term imprisonment of not less than 10 years. Or life imprisonment.