Enforcement of Chinese Insider Trading Law: An Empirical and Comparative Perspective

This Article conducts the first comprehensive and systematic empirical analysis of all relevant insider trading cases in China from the birth of Chinese securities markets in the early 1990s until mid-2017, shedding light on the way in which China's insider trading law has been enforced by the regulator and criminal courts in practice. First, the Article generates descriptive statistics on features of insider trading cases, such as the total number of cases over the study period, the temporal distribution of the cases, the identity of the insider, and the nature of the insider information. Second, it measures the intensity of insider trading enforcement and compares the Chinese situation with six overseas jurisdictions, including the United States, the United Kingdom, Australia, Canada, Singapore, and Hong Kong. Third, using multiple regression analyses, it identifies potential factors determining the administrative and criminal penalties for insider trading. The results of the empirical study indicate that China has significantly stepped up its efforts to crack down on insider trading in recent years, resulting in a sharp increase in insider trading cases, particularly criminal cases since 2008. While the Chinese insider trading law was essentially transplanted from overseas jurisdictions, its; enforcement has exhibited distinctive features in its local environment. Judging by the type, magnitude, and frequency of the sanctions imposed, the intensity of insider trading enforcement in China seems to be at a level comparable to relevant jurisdictions overseas. Administrative and criminal penalties against insider trading are found to be significantly influenced by some factors, notably the amount of illegal proceeds, the magnitude of social impact, the presence of mitigating circumstances, and whether the trader used others' accounts to trade. The hope is that the empirical findings will help inform the policy debate over the regulation of insider trading in China and beyond.