Investors Should Be Highly Aware of the Legal Risks of Lending Securities Accounts

Kang Jinqiu

January 10th, Shanxi Securities Regulatory Bureau issued a fine notice to Li Hang for lending his securities account to others, requiring correction, warning, and a fine of 30,000 yuan. I believe that investors should be highly aware of the legal risks of lending securities accounts.

Li Hang opened a securities account at Zhongxin Securities' Beijing Miyun Branch and subsequently entrusted it to Guo Meng, who controlled and used the account. From June 20th to July 31st in 2024, Guo Meng bought 26.2 million yuan's worth of "Klaus" stocks using this account, and then sold 21.3 million yuan's worth from August 2nd to October 21st. At the end of the transaction, he still held 164,731 shares; all the funds came from Guo Meng, and the ownership of the sold and held shares also belonged to him. This transaction may constitute insider trading according to the fine notice issued by Shanxi Securities Regulatory Bureau on January 10th.

Article 58 of the Securities Law states that any unit or individual shall not lend their securities account or borrow someone else's securities account for securities transactions. Article 195 states that if a securities account is lent or borrowed, the authorities will order correction, issue a warning, and impose a fine of up to 50,000 yuan. In this case, Li Hang was only fined for lending his securities account without involving insider trading or participating in stock operations.

Suppose an investor lends their securities account to others for market manipulation, insider trading, and other illegal activities while sharing profits, I believe that the account holder may also be liable for other legal responsibilities. For example, according to the Securities Law, if market manipulation or insider trading constitutes a crime, the account holder may be held criminally responsible.

In reality, criminal law has the concept of joint crimes involving two or more people. The main offender is the one who plays the leading role in the crime, while the secondary offender is the one who provides tools for the crime, eliminates obstacles to the crime, indicates the location and object of the crime, etc. I believe that if the account holder knows that the borrower is engaging in illegal activities but still lends their account, they may be considered a secondary offender or a joint criminal.

In practice, insider traders often borrow someone else's securities account to conceal their transactions. This may be a major hotspot for securities account lending. The account holder may not be aware of the borrower's illegal activities and may even promise and fulfill profit-sharing, which may lead to administrative fines of up to 50,000 yuan without any criminal responsibility.

Lending or borrowing securities accounts can disrupt market order, affect market fairness and transparency. Shareholder information disclosure is an important part of the securities market's transparency system. Lending or borrowing securities accounts may render genuine, accurate, and complete disclosure meaningless, leading to tax evasion and other illicit activities. Lending or borrowing securities accounts will also increase the difficulty of investigating illegal activities for regulatory agencies, lowering their efficiency.

Therefore, regardless of whether it is lending or borrowing securities accounts, both should be strictly punished and not tolerated.

Of course, we must also prevent the phenomenon of husband-and-wife account holders using each other's accounts to buy new stocks. The assets of a married couple are one and the same, and opening two separate accounts can increase their chances of winning in lotteries. From a legal perspective, this behavior should be exempt from administrative responsibilities and criminal liabilities.

From an investor's perspective, it is absolutely impossible to treat account lending as a trivial matter that can be brushed aside due to social relationships or friendship. Securities accounts are like personal identity cards and cannot be lent arbitrarily. We must prevent unnecessary legal troubles from arising.

In conclusion, regulatory agencies and judicial departments should strictly pursue administrative responsibilities, civil liabilities, and even criminal liabilities for violations of securities account lending or borrowing behavior. Only then can the real-name system for securities accounts be truly implemented, and related illegal activities can be effectively curbed.

The opinions expressed in this column are solely those of the author