M & A in the insider trading inquiry

[Abstract] insider trading is common in global capital markets, especially in our "emerging and transition," the special context of insider trading is not only contrary to open, fair and equitable principles of capital market Development, but also a serious impediment to market-oriented reforms The Article in China's capital market, mergers and acquisitions in the enterprise for the study of insider trading, mergers and acquisitions from the characteristics and motivations of insider trading, mergers and acquisitions in the search for how to prevent insider trading-related measures.

[Keywords:] China's capital market, insider trading, mergers and acquisitions, regulation, Information disclosure

I. BACKGROUND

Insider trading is the common problem of global capital markets, especially in our "emerging and transition," the special context of insider trading is not only contrary to open, fair and equitable principles of capital market Development, but also a serious impediment to market-oriented reforms in 2010 listed companies held in early normal operation of the eighth meeting of the Thematic Working Group on the Commission, Ministry of Public Security, Ministry of Supervision, the SASAC and other units jointly agreed to strengthen insider Information management, integrated prevention and control of insider trading as an important current specific tasks, building on the insider trading "concerted efforts, combining, integrated control," the long-term mechanism .2010 May, the Commission, Ministry of Public Security, Ministry of Supervision, the SASAC, the Bureau of Corruption Prevention, Office of Legislative Affairs have jointly launched the normal operation of listed companies integrated prevention and control panels feature insider trading Research work, the combat and prevention of insider trading referred to an unprecedented height.

November 16, 2010, the State Council issued a <<State Council forwarded the Commission and other depArtments to crack down on insider trading and the prevention and control of capital markets advice to inform>> (Guo Ban Fa [2010] No. 55, referred to as << notification>> to crack down on insider trading and the prevention and control work of co-ordination arrangements and full deployment on 18 November .2010 Circular of the State Council, five depArtments of the Commission "to crack down on insider trading and the prevention and control of the capital market views >> for the maintenance of market order and protect investors' legitimate rights and interests, to promote stable and healthy Development of China's capital market, crack down on insider trading and the prevention and control of capital markets put forward the "unity of thinking, awareness, improve the system, effective prevention and control, clear responsibilities the focus on "three views.

Mergers and acquisitions of listed companies are prone areas of insider trading, insider trading case Liaohe Textile, textile insider trading case Tianshan DepArtment of mergers and acquisitions are the sky, so monitoring and cracking down on M & A in the insider trading insider trading has become integrated prevention and control system a top priority. September 17, 2010, the SFC announced <<M & audit opinion on the issue of common concern points>> to deal with insider trading price fairness, profitability and forecasting, asset ownership and integrity, industry competition, related pArty transactions, continued viability of insider trading, and disposal of claims and liabilities, changes in equity and equity transfer and transition arrangements for the remaining nine content loss as a restructuring project in the audit should focus on the ten areas. a very high degree of concern for the market, insider trading, regulators be dedicated to a focus, specifically focused on the filing of the complete transaction and the legality of the contents of two of six .2010 October 19, the China Securities Regulatory Commission meeting in the central groups, party committees and the Commission Secretary, Chairman Shang Fulin, with the capital market reform and Development, securities and futures regulatory system study and implement the 17 th spirit of the "to implement the national" five "plan, prepare the ground and actively improve the institutional arrangements for M & A market , increase illegal insider trading investigation and punishment of violations "requirement. shows how to prevent insider trading in M ​​& A related to China's capital market stability and healthy Development, attention should be paid.


Second, mergers and acquisitions in the insider trading

(A) insider trading
Insider trading (also known as insider trading that the company known directors, supervisors, managers, officers or principal shareholders, the stock market insider and market managers to use their status, duties and other facilities, access to the issuer not been made public, could affect the prices of the securities important Information for securities transactions, or disclosure of Information to obtain benefits or to reduce Economic loss. on the core elements of insider trading are "binary", "the three yuan said," and "four Yuan said." I that the "binary that" a single insider and insider Information, and two static elements of insider trading can not be fully interpreted, and "four, said that" in the "subjective and objective aspects of" two elements is the "based on insider information transactions "refinement," Three said, "both the subject of insider trading (insider trading insider, object (two static elements of insider information, also contains the main elements in the dynamic behavior of the object (based on insider trading information ), complete without cumbersome interpretation of the core elements of insider trading.

In 2005, China implemented in 1999 on the <<Securities Act>> was substantially modified in the regulation of insider trading has also made considerable progress. Modified <<Securities Act>> Article 74 and seventy-five respectively insider insider information, insider information were defined. In regard to insider trading, and always because of their complex and diverse, difficult to identify sex, and did not have a precise definition or a list, but is certain is that insider trading and capital market development in China, "Excellencies," contrary to the principles and strategic objectives not only against the stock market based, but also damage the legitimate interests of investors, the Commission has always been the focus of Law enforcement investigation. China's 1997 implementation of the <<Penal Code>> the earliest form of the Basic Law provides for Criminal and Criminal insider trading the year 1999 the implementation of the <<Securities Act>> on inside information, insiders, such as the type of behavior has made detailed provisions modified <<Securities Act>> Article provides that "prohibits fraud, insider trading and stock market manipulation behavior ", Article 73 provides that" prohibit securities trading and illegal insider information insider insider information to get people to use insider information in securities trading activities. "
Although Laws and regulatory approach for prohibiting insider trading consistently against efforts have been strengthened, but the cases on insider trading has always been .2008, the Commission were transferred to the Ministry of Public Security, including the case of Huang Guangyu, Liu Baochun case, Zhongshan common case, the Haizu Long case, Thecus industrial case, Ya-tube case, only the case of high-Yang and other large cases and typical cases of suspected insider trading, including Criminal cases (a total of 29 clues. January-October 2010, SFC received a total of 114 insider trading leads, an investigation of insider trading cases 42, has been due to insider trading of 16 individuals, two organizations an administrative penalty of 15 cases of suspected Criminal insider trading case to public security organs. With the market , the new international capital market reforms, more diverse body of insider trading, insider trading means more diverse, more covert means of operation, the scope of insider information more widely, making the already complex and difficult insider trading picket work more difficult to carry, let alone those of insider trading "ex ante" motives analysis and identification and marshals so the data and the case of investor confidence caused a great threat, and even exacerbated the market panic.

(B M & A function and situation
Mergers and acquisitions as the most sophisticated capital market in resource allocation and structural adjustment Technology, optimization and upgrading of industrial structure, promote balanced development of capital markets multi-dimensional effective means through mergers and acquisitions, companies can not only conduct business and management adjustments to improve the corporate governance, improve operational efficiency, but also through the effective use of resource elements, and specific coordination of re-integration, to enhance their core competitiveness and competitive advantage, brand, Technology, marketing, procurement, extension services and other aspects of the value generated , up to 1 +1> 2 synergies that create and add value to the so-called double effect.

In November 2008, Premier Wen Jiabao stressed the means to integrate the use of industry mergers and acquisitions, crisis .2008 December 13, the State Council issued the <<on the current financial Economic Development of the>> (of 30, referred to as "gold thirty," even more directly to the acquisition of loans as an innovative initiative, the CBRC issued a merger then measures the risk of lending guidelines, according to statistics, in 2008 more than $ 50 million deal size from $ 15.7 billion in 2005. , rose to $ 52.4 billion, an increase of nearly nine times as of November 19, 2010, 2010, acquisition of a listed company audit committee has reviewed mergers and acquisitions activity by 32.

The one hand, China's capital market M & A activity strong in the rising, the rapid growth of transaction size; the other hand, M & A in the insider trading has soared as China's capital market, M & A market, standardization and internationalization brought a series of synergies, and merger and reorganization of insider trading brought against the principles of the market, the collapse of market confidence issues related to China's capital market reform and development. Thus, pondering mergers and acquisitions in the insider trading, mergers and acquisitions for our Restructuring of insider trading trend and integrated control system of the building is very urgent and important.

(C M & A in the insider trading
M & A is an eternal focus. Throughout the global economy over the past 100 years, the mature Western market has experienced five mergers and acquisitions, the impact of the deep effect of the large self-evident, but the in our country, why M & A to promote the process will do with the prevalence of insider trading? In my opinion, to explore M & A in the insider trading, should be combined with China's capital markets business to analyze the characteristics of mergers and acquisitions.

First, with China's capital market "emerging and transitional" special background has some relevance. External capital market imperfections, information asymmetries, agency problems seriously, the overall capital market development in the first line of potential crisis, such as institutional the process of change that exist in hostile mergers and acquisitions, restructuring false, behind all insider transactions in addition, M & A as a dynamic capital management activities, transactions involving a variety of resources in addition to elements of the subject, but also including corporate culture, systems, experience , reputation, organizational structure and regulatory environment and other external factors due to the uncertainty of these factors, the portfolio is complex, as the value of M & assessment brought uncertainty, but also provide space for the insider trading.

Second, control of listed companies in China there is a big premium. Controlling shareholders of listed companies to obtain additional control over the benefits of using the possibility of very large, re-financing opportunities for "misappropriating" the objective is no longer distant. So through mergers and acquisitions to compete for control of and thus brought about the use of control and information superiority, funding, internal capital market advantages of insider trading, the major shareholders and institutional investors access to high premiums are common occurrences. Shanghai Bureau Task Force (2006 states: After 2007, China's capital market ushered in the circulation of the times, as large shareholders in the decision-making and access to information on the advantages and the huge number of large shareholders to bring greater benefits, with information superiority with the funds together with major shareholders advantage of institutional investors to participate in a greater possibility of insider trading, the insider trading under the circulation may be more serious. Manchu Tian (2009 compared before and after the split share structure reform of China's cumulative average abnormal returns and abnormal turnover trends, obtained in the split share structure reform in China there are more serious information leak, leading to insider trading and market manipulation.

Links to free download http://www.hi138.com

Third, M & A brings an opportunity to manipulate the market price. Insider trading makes the market for mergers and acquisitions and other important information to early response, resulting in abnormal stock price volatility due to merger and reorganization of China's capital market is still the mainstream of the injection or spin-off of assets, mergers and acquisitions restructuring of the listed company's asset quality and profitability of the impact is very large. domestic and foreign mergers and acquisitions on the performance of Research from all angles are verified the fact that the acquisition of the company's performance has a significant positive effect, such as the Pan Jin, Min Chen (2005 will occur through mergers and acquisitions of listed companies did not occur to compare occurrence of mergers and acquisitions of listed companies found that the whole performance was no better than the acquisition of listed companies based on profit-driven desires, mergers and acquisitions often lead to secondary market prices of listed companies, non-rational volatility, or even market turmoil, and China's management of mergers and acquisitions, there are still some loopholes, especially in many of our mergers and acquisitions have occurred between related enterprises or government-led within the same jurisdiction between enterprises, information disclosure and regulation of mergers and acquisitions are varying degrees of vulnerability, even to some inside information insider to manipulate the market price, provided an opportunity to reap undue profits such as good information before the public in waiting to buy shares in the profits or interest information sell the stock before the public in order to avoid losses.

Fourth, while the open M & A is increasing, but still closed M & A mainstream M & A often closed due to the parent company or government backing, it is easier to complete. This "green channel" of mergers and acquisitions, but the mechanism is precisely what the brewing hotbed of insider trading activity, mergers and acquisitions as the market screening mechanism mere formality, but also the lack of effective governance of listed companies of the external constraint mechanism is not conducive to capital market allocation of resources to play.

In the context of the above characteristics, how to ensure that mergers and acquisitions process open, fair, impartial, transparent and effective fight against insider trading and market manipulation, promote market-based mechanism for mergers and acquisitions and related Laws, regulations and policies, improvement of our multi-level, standardization, international capital markets to build great significance to the regulatory authorities have brought new challenges.


Third, the prevention of insider trading in M ​​& A strategies

I believe that, in order to control M & A Analysis of how the response from insider trading insider trading motives, as well as mergers and acquisitions in both the characteristics of insider trading starting.

(A) based on insider trading motives
From a limited starting assumption of rational Economic man, the most fundamental motivation for insider trading is that insiders of the insider trading insider benefits and costs of trade-off when the result of insider trading and so bring the expected return is greater than the cost to bring punishment, insider will implement the main trading insider trading, where the benefits and costs include not only Economic, legal, but also mental or moral, which gave us two focal points: to reduce benefits and increase the expected penalty costs.

1 lower expected return. Here reference Li Xin Dan, Song Surong et al (2008 on insider trading motives of the state of perception indicators (internal control and information disclosure and the result: When the inside of the main subjective perception that the company's internal control over good and the quality of information disclosure well, it will weaken the implementation of the insider trading behavioral tendencies. explore the perception of these two indicators of the state has been able to play such a result because, I believe that its essence is to reduce the expected return of insider trading, therefore, strengthen internal controls, improve corporate governance, improve the adequacy of disclosure, conscientiously implement the <<Internal Control specification>> and <<Company Information Disclosure of Listed>> is to reduce the expected return of insider trading behavior of the main fundamental measures.

(2) increase the cost of punishment, although Scott, Grasmick (1982 deterrence for Criminal acts motivated to legal punishment of variable incentives, social reputation and feelings of guilt affect the three variables, and that the guilt of the strongest, followed by social reputation, legal punish the weakest, but I believe that based on our unique capital market environment, the legal punishment is deterrence of insider trading variables. Therefore, to increase the insider trading investigation and punishment, and actively promote the <<Penal Code Amendment (7> > the use of crime deal to write non-public information "Criminal Law>> .2010 May 18, the Supreme People's Procuratorate, the Ministry of Public Security jointly issued the <<on the public security organs under the jurisdiction of the criminal case prosecution provisions of the standard (two>> further defined the crime of the criminal case of insider trading prosecution standards.

(Two insider trading based on the characteristics of M & A
1. Strengthen market-oriented reforms, and promote the development of M & A norms: fully implement the <<listed company's major asset restructuring management approach >>,<< acquisition management practices of listed companies>> especially <<M & common problems concern audit opinion points>> on the content of insider trading, while the six, company mergers and acquisitions continue to improve laws and regulations, establish a standard, active M & A market, improve the exit mechanism to achieve the release mechanism from the approval system to the registration system changes, and thus the formation of external constraints on the effective mechanism to promote the optimization and listed companies.

(2) the M & A simplistic, controlling shareholders of listed companies to encourage high-quality assets and advantages of the project to focus on listed companies, the market-oriented mergers and acquisitions of listed companies to guide their overall market, to achieve integrated industry mergers and acquisitions. To change the agreement to acquire the Lord of the shares traded, to promote the tender offer, the acquisition of block trading and auction.

3. Strengthen the supervision of team building, improve the efficiency of supervision. To promote the approval of the main regulatory focus to the main changes to the disclosure of information to promote regulatory approach to the functional supervision from the authorities to monitor the gradual change, strengthen regulatory coordination, prevent long supervision, monitoring absence , different regulatory standards, the practical implementation of insider trading for M & A legal and institutionalized.

In addition, to strengthen publicity and education for the intensity of insider trading, insider trading and actively explore the reward system, and strengthen public company directors, supervisors and senior executives, employees and other stakeholders securities transactions on the dangers of insider knowledge to improve their resistance to insider the consciousness of the transaction, to develop good professional ethics, while strengthening relevant regional, inter-sectoral regulatory cooperation, the formation of the upper and lower linkage, linkage, linkage of regional effects, which for a wide range, depth, multi-angle combat prevention and control of mergers and acquisitions and restructuring of insider trading has a role not to be underestimated.


IV Summary

China's capital market is accompanied by Economic reform and gradually developed the "emerging and transitional" market, with some mature markets of self-evolution model of development, the Chinese capital market development by joint efforts of government and the market, take a "government top-down driven "and" self-evolving market, "a combination of market-oriented reform path. the road of reform and development and other issues such as insider trading is inevitable, multiple-prone, complex and diverse phenomenon of the short term is difficult to eradicate. combat and prevention and control of insider trading is a systems engineering, enterprise integration of mergers and acquisitions of industrial upgrading, and strategic expansion of the trend, therefore, for insider trading, mergers and acquisitions, especially in the combat and prevention of insider trading, but also education, legislation, control, integrity, punishing level multi-pronged approach, in practice continuous improvement continuous improvement to achieve capital market openness, fairness, impartiality, transparency.

[References]
[1] Well Tao. Insider trading regulation on the [M]. Beijing University Press, 2007.

[2] Lishan Min, Chen Yugang M & A Forum 2009 [M]. China Economic Publishing House, 2010.

[3] Research Center for worldwide mergers and acquisitions in China M & A Report 2009 [M]. China Financial Publishing House, 2009.

[4] Zhang Wenkui. China's capital market, M & A characteristics and policies [J]. Chongqing Institute of Technology (Social Science, 2009 (8:1-7.

[5] Tian full text. Tradable share reform in insider trading and market manipulation behavior [J]. Audit and Economic Research, 2007 (7:103-107.

[6] Li Xin Dan, Songsu Rong, Lu Bin, check Xiaolei. Stock market insider trading motives of [J]. Economic Research, 2008 (10:65-78.

Links to free download http://www.hi138.com