Everyday Review: Severe Punishment for Manipulating Stock Prices; Pursue Civil Liability Against "Perpetrators"

By Every journalist Shuaixi

Since the beginning of the year, the China Securities Regulatory Commission (CSRC) has disclosed several typical cases of securities market manipulation on its official website, involving multiple stocks such as Haozhiji Electronics, Jinding Sports, and Hengrun Shares.

Stock price manipulation has long been a "cancer" in the capital market, severely impacting the market's fairness and transparency. The regulatory authorities have shown their determination and strength in cracking down on market manipulation by publishing these typical cases. However, I believe that apart from imposing severe penalties on stock price manipulators, we should also strengthen protection for investors who have suffered losses, such as increasing accountability for those responsible and establishing a special fund to compensate investors using the penalty.

Through human manipulation of the market, stock prices can be distorted, leading to rapid fluctuations that mislead investors' decision-making. In essence, this is "cheating". The key issue lies in the existing compensation system primarily targeting listed companies, with investors typically filing lawsuits against these companies to seek compensation. However, listed companies often serve as "trustees", with their actual controllers and management teams executing their intentions.

From a legal perspective, listed companies are composed of all shareholders, serving as "trustees". In reality, they are operated by actual controllers and management teams acting as "agents". When investors seek compensation from listed companies, it is essentially "trustee" seeking compensation from another "trustee", making it unclear who bears responsibility. Therefore, civil liability for stock price manipulation should focus on the main perpetrators rather than the listed company itself. If the management team has played a role in facilitating market manipulation, they should be held accountable.

Furthermore, determining the causal relationship between stock price manipulation and investor losses is another challenging issue. Stock price manipulation often involves a prolonged period, including preparation, fluctuations, absorption, and withdrawal phases. For example, the Haozhiji Electronics manipulation case lasted over a year, from September 18th, 2019 to December 31st, 2020. Each stock has numerous investors with different buy and sell times and positions, making it difficult to determine the losses caused by manipulation. As a result, even if investors file lawsuits, such securities cases often involve high litigation costs.

In actual market manipulation cases, false statements are often clear evidence of causal relationships. Therefore, I believe that for stock price manipulation in the securities market, regulatory authorities can start by identifying those responsible through false statement claims and then pursue civil liability, swiftly locking down the perpetrators and providing relief to victims.

I recommend that for individuals who have manipulated stock prices solely using financial advantages, we establish a special fund from their penalties to compensate investors. The compensation amount can be determined based on investors' purchase nodes and the maximum price decline during the relevant period. This not only ensures that injured investors receive reasonable compensation but also increases the cost of market manipulation, achieving a deterrent effect on the market.

In recent years, regulatory authorities have made significant progress in their pursuit of market manipulation, with notable effects. In the future, regulatory agencies should continue to strengthen their efforts against stock price manipulation, establish more perfect civil liability mechanisms, and ensure the fairness and transparency of the capital market. At the same time, by improving compensation mechanisms, protecting investors' interests, enhancing market confidence, and promoting healthy development.