[Direct answer]In the Beijing area, the consequences of insider trading being investigated cover three levels: administrative, criminal, and civil. Administratively, according to Article 191 of the Securities Law of the People's Republic of China (effective March 1, 2020), if an insider or someone who illegally obtains insider information trades securities, the securities regulatory authority shall order the illegal securities to be disposed of in accordance with the law, confiscate the illegal income, and impose a fine of not less than one time but not more than ten times the illegal income; if there is no illegal income or the illegal income is less than 500,000 yuan, a fine of not less than 500,000 yuan but not more than 5 million yuan shall be imposed. Criminally, according to Article 180 of the Criminal Law of the People's Republic of China (effective October 1, 1997, and subsequently amended by the Criminal Law Amendment), those who commit serious crimes shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention, and those who commit particularly serious crimes shall be sentenced to fixed-term imprisonment of not less than five years but not more than ten years and be fined. Civilly, investors who suffer losses due to insider trading may claim compensation according to law. After being investigated, they should seek professional legal help as soon as possible and refer to the relevant provisions for reference.\nCross-border financeColumn.

1. Problem background and typical scenarios

Such concerns are common in several situations: First, the directors, supervisors, senior managers, major shareholders, or participants in mergers and acquisitions of listed companies are monitored and warned by the stock exchange for trading stocks during sensitive periods; Second, relatives and friends who know about important information "follow suit" and are identified by big data screening and have their accounts linked; Third, securities practitioners use undisclosed information to conduct disguised transactions; Fourth, when under investigation, they do not know the boundaries of their rights and make improper statements, which increases the risk; Fifth, their accounts are restricted from trading or they are required to cooperate with the investigation, and they do not know how to respond. As a concentration of regulatory authorities, Beijing has seen more frequent inspections and referrals of such cases, and the response to criminal risks can be referenced accordingly.Criminal defenseColumn.

II. Key points of dispute

Focus I: Identification of insider information and insiders. Insider information must be material and undisclosed, and insiders include statutory insiders and those who illegally obtain information. Focus II: Correspondence between trading behavior and sensitive periods. Trading in related securities during the period from the formation of insider information to its disclosure constitutes insider trading, regardless of whether actual profits are obtained. Focus III: Coordination between administrative and criminal prosecution. Cases meeting the criteria of serious circumstances will be referred to the public security organ for criminal prosecution. Focus IV: Calculation of illegal gains. Both actual profits and losses avoided can be included in the calculation. Focus V: Defenses, such as those based on existing trading plans or the legitimacy of information sources. Focus VI: Assumption of civil liability for compensation. Claim paths of aggrieved investors and determination of causality. Specific provisions shall be subject to the currently effective laws, regulations, and judicial rulings.

III. Professional analysis by Henglue Lawyers

Judging from the practical experience of lawyers from our firm in handling securities compliance and financial disputes, the severity of the consequences after being investigated largely depends on the timing of intervention and the response strategy. Common situations include: after the exchange conducts abnormal transaction monitoring, regulatory authorities launch an investigation, during which account transaction records, communication records, and fund flows are comprehensively retrieved; after the investigation ends, administrative penalties may be imposed, or no penalties may be imposed due to insufficient evidence or minor circumstances; if the case involves serious administrative penalties, it will be transferred to the public security organ for criminal investigation. Lawyers from our firm suggest: after receiving inquiries or notifications to cooperate with the investigation, statements should be made under the guidance of professionals to avoid exaggerated or speculative statements; evidence of transaction decision-making basis, information acquisition timing, and the independence of transaction plans should be organized in a timely manner; if dissatisfied with the administrative penalty decision, one can apply for administrative reconsideration or initiate administrative litigation; if the case has entered the criminal process, it is advisable to engage a defense lawyer as soon as possible to review the evidence and strive for lenient circumstances. It should be noted that the evidence in insider trading cases mainly includes electronic data and fund traces. The earlier professional intervention is carried out, the greater the room for defense. For cross-border securities investment and compliance matters, reference can be made to the relevant provisions.\nCross-border financeColumn.

IV. Practical suggestions and legal basis

Action recommendations: First, upon receiving regulatory inquiries or investigation notifications, promptly engage professional lawyers to clarify one's position in the proceedings. Second, comprehensively review the decision-making process, funding sources, and information channels of the involved transactions, and prepare written explanations for future reference. Third, during the investigation, truthfully state known facts and refrain from making speculative statements about uncertain matters. Fourth, if receiving a pre-penalty notice, exercise the rights to make statements and defenses and strive to mitigate penalties. Fifth, if subject to criminal measures, promptly engage defense lawyers to apply for modification of coercive measures and commence defense. Sixth, monitor civil compensation procedures and properly handle potential settlements with affected investors. Legal basis: Articles 50 to 54 of the *Securities Law of the People's Republic of China* (effective March 1, 2020) define insiders, insider information, and prohibitive provisions. Article 191 of the *Criminal Law of the People's Republic of China* (effective October 1, 1997, amended by subsequent criminal law amendments) stipulates criminal liability for insider trading and disclosure of insider information. For matters related to financial compliance and foreign investment, refer to the relevant provisions.\nCross-border financeColumn.

5. Henglu Law Firm's Reminder

Risk Warning: Firstly, insider trading does not require profitability, and loss-making transactions may also be subject to penalties; Secondly, under big data monitoring, it is extremely easy to identify the links between relatives' and friends' accounts, and the risks of "borrowing accounts" and "copying trades" are extremely high; Thirdly, the record of administrative penalties will affect the qualification for employment and market access, and directors, supervisors, and senior managers should be particularly cautious; Fourthly, remaining silent or resisting investigations is not a viable strategy, and improper statements may be fixed as unfavorable evidence; Fifthly, the amount of fines and the length of prison sentences will increase with the scale of illegal income, and early intervention will provide more room for negotiation. It is recommended to seek advice immediately after receiving any inquiries.Beijing Henglu Law FirmOn the official website, similar columns are set up, and professional lawyers develop response plans for them.

VI. Frequently Asked Questions

Q1: Will you be sent to prison if you are found guilty of insider trading?

It depends on the severity of the circumstances. In the administrative investigation stage, the punishment usually includes confiscation of illegal income and fines; according to Article 180 of the Criminal Law, those who trade or disclose insider information with serious circumstances shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention; and those with particularly serious circumstances shall be sentenced to fixed-term imprisonment of not less than five years but not more than ten years and be fined. Whether the case meets the criminal standard depends on factors such as the transaction amount, the scale of illegal income, and the impact on the market. Hiring a defense lawyer as soon as possible after the case is filed is the key to obtaining a lenient and suspended punishment.

Q2: What is the maximum fine for insider trading?

According to Article 191 of the Securities Law, the illegal income shall be confiscated and a fine of not less than one time but not more than ten times the illegal income shall be imposed; where there is no illegal income or the illegal income is less than 500,000 yuan, a fine of not less than 500,000 yuan but not more than 5 million yuan shall be imposed. Accordingly, if the illegal income is huge, the fine can reach tens of millions of yuan or even higher. For units that violate the law, the directly responsible person in charge and other directly responsible persons shall also be fined. The specific amount shall be determined by the regulatory authorities in light of the circumstances.

Q3: Can investors claim compensation for losses caused by insider trading?

This can be claimed. If insider trading causes losses to investors, the perpetrators shall bear compensation liability in accordance with the law. The difficulty of claiming compensation lies in the determination of the causal relationship between the losses and insider trading and the calculation of the losses, which requires comprehensive judgment based on the transaction time, price, and information disclosure. The regulatory punishment decision can serve as an important basis of evidence, and when meeting the conditions, the rights can be claimed through litigation or mediation. The specific acceptance standards and calculation methods shall be subject to the currently effective laws, regulations, and judicial rulings.

Q4: What should I do after being investigated by the China Securities Regulatory Commission?

The first step is to confirm your own identity in the case, whether you are an insider, a counterparty in the transaction, or a witness. The second step is to sort out the timeline of transaction decisions and information acquisition under the guidance of a lawyer and prepare a written statement. The third step is to cooperate with the investigation and provide truthful statements without concealment or speculation. The fourth step is to pay attention to the progress of the investigation and the notification of penalties, and to exercise the rights of statement and defense, hearing, and appeal in a timely manner. The fifth step is to prepare a defense plan simultaneously for criminal risks. Proper responses can significantly affect the outcome of the punishment.

Q5: What constitutes insider information and insider trading?

Insider information refers to information involving the issuer's operations, finances, or other matters that could significantly affect the price of securities in the market and have not been made public, such as major mergers and acquisitions, refinancing, and dramatic changes in performance. Insider trading refers to insiders or those who illegally obtain information buying and selling securities before the information is made public, leaking the information, or advising others to buy or sell. Transactions during the sensitive period constitute insider trading even if they result in losses, and have nothing to do with profits and losses. The relevant compliance boundaries can be referred to for further details.\nCross-border financeColumn.

The above answer is based on the judicial practice in Beijing. The judicial interpretations in other provinces or cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Financial capital legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.