An Empirical Study On Insider Trading Administrative Punishments

The implementation and development of the securities issuance registration system depends on an effective securities supervision system.As one of the main contradictions of securities supervision,insider trading is known as a common problem in China's securities market.The regulation of insider trading in China mainly comes from the administrative penalty and market ban imposed by CSRC.In recent years,there have been some empirical studies on the administrative penalty of CSRC.But in the existing empirical studies there are three main shortcomings: firstly,often only to one or several years of practices of CSRC,the time span of the researches is not wide enough;secondly,only the administrative punishments or some parts of the administrative punishments(such as fines)have been studied,which leads to a lack of a comprehensive discussion;thirdly,the existing researches only obtained some descriptive statistics of punishments,they have not done regression analysis or correlation test,which makes it impossible to know the factors that determine the severity of the CSRC's punishments.In order to understand the current situation of insider trading regulation,the patterns of insider trading behaviors,as well as to find the logic and shortages of regulatory practice in China,in this thesis,230 "the decision on administrative punishment" and 15 "market ban decision",which were made by CSRC from 1994 to2017,have been studied,with tools such as descriptive statistics and multivariate linear regression analysis,trying to find out behavior characteristics and change patterns of insider trading,as well as the key factors of the CSRC penalty severity.This thesis also constructed a rational decision-making model to explore the cost-benefit analysis of an average rational person,to find out whether the current administrative penalties and market bans of insider trading would be enough to curb insider trading behaviors.In terms of the general pattern of punishments,this study found that since 1994,the number and size of cases of insider trading has increased substantially.The analysis on inside information indicates that the reorganization of the company is the main area of insider dealing.The statistics of the parties show that the insider information of the securities market is widely disseminated.According to the analysis of the patterns of insider trading behaviors,buy-and-sell makes the main part of the insider trading behavior,but with the increase of account manipulations and information leakages,insider trading behaviors are becoming increasingly concealed,which brings new challenges to investigations.In terms of penalty decision factors,this thesis found that when the illegal income is higher than RMB 30,000,illegal income is the most important factor punishment decisions,the greater the illegal income,the heavier the punishments.But when the illegal income is lower than RMB 30,000,the size of case,the type of insider trading behavior and manipulation of accounts are the deciding factors.The study also found that,the punishments were heavier in 2017;the penalties on individual investors at all times are heavier than those on institutional investors;the legal discretion factors were not really concerned by CSRC,which is inconsistent with the legal requirements.In terms of the rational decision model,the study found that if the number of undetected insider trading behaviors is not considered,the illegal income is often lower than the result of the comprehensive punishments.But in the real world,there exists a great number of undetected insider trading behaviors,if let the number be equal to the penalty case number(i.e.,as listed company insiders cognize),the illegalincome is lower than the potential comprehensive punishments;if let the number be four times the number of penalty cases(i.e.,as securities practitioners cognize),the punishments is not enough to suppress insider trading at the micro level.On the basis of the present study,and in reference to legal practices of other jurisdictions and the empirical evidence provided by scholars,in order to improve the insider trading regulation,following suggestions are given in this thesis: first,as for the defects of afterwards supervision,establish private law enforcement mechanisms,including insider trading civil procedure rules and the administrative punishment distribution system;secondly,as a complementary system of insider trading law enforcement,strengthen the information disclosure law enforcement,and establishes the public notice system of the share changes of insiders;thirdly,to strengthen and improve the administrative punishment law enforcement,exercise discretion in accordance with the law,use shame strategies to increase the expected cost of insider trading,and use big data to increase the probability of investigations.