Chapter 5 Lecture 04: Behind the most "beautiful" retail investors

●Ren Zhunxiu and his wife made more than 50 million by frying the famous ST Salt Lake. ●It is not known that your family will be ruined and your wife and children will be separated from the lawsuit. ●You want to prove that you did not know that the stock price would rise the day before, how do you prove it? From October 2007, when the Shanghai Composite Index reached its highest point of 6124, to March 2008, the A-share market has fallen by more than 40% in five months, and the market value of trillions of yuan has evaporated.However, stockholders who were struggling in the bleak trading atmosphere were surprised to find that some individual investors who appeared in the market and were called the most "best" retail investors made amazing profits.What does the existence of these most "beautiful" retail investors show? Do the regulatory rules behind them need to be re-examined?

Hello, everyone!We have recently discovered a few so-called most "beautiful" retail investors. Who are these people?Among them are Ren Huaixiu, a professor at Renmin University, and his wife.This is probably the first time I have heard that professors can make money by speculating in stocks. Usually, professors lose money by speculating in stocks.Ren Huaixiu and his wife made more than 50 million yuan by frying the famous ST Salt Lake. This incident caused an uproar in the stock market.So in the end his level is high, or is there some insider trading? Ren Huaixiu, deputy dean of the School of Finance of Renmin University of China, doctor of economics, in March 2008, because of his involvement in ST Salt Lake, the market value of his account skyrocketed by 7 times, and he and his wife made a total profit of more than 50 million yuan.The major doubt about this incident is that in the context of the stock market plummeting, Ren Huaixiu dared to use a huge sum of 8 million yuan to invest in "junk stocks".It is said that Ren Huaixiu was once a digital restructuring consultant for SST, the predecessor of ST Salt Lake, which made the profit-making behavior more suspicious.At present, the regulatory authorities have intervened in the investigation, while Ren Huaixiu and his wife have "disappeared" in the public eye.

Besides him, there is also a very common name, Liu Fang.What did Liu Fang, a classmate, do? There is this person behind ST Jintai's 42 consecutive daily limit; this person is behind S Fiyta, which has failed the share reform the most times.This person made a profit of hundreds of millions in half a year. Through a series of "superb" operations, Liu Fang made a profit of over 100 million in half a year. Liu Fang was called the most "beautiful" retail investor in 2007, and his legendary story is still talked about.After verification by the media, the so-called Liu Fang was not a beautiful woman, but a male driver, and he himself was not a billionaire.From this, it is speculated that the activities behind Liu Fang, a natural person shareholder, may be private equity institutions engaged in insider trading.However, so far, the Liu Fang incident has not come to light.

Our small and medium stockholders are unlucky and have been losing money since May 31, 2007. Only these people can make money. This phenomenon is particularly interesting.Wang Jiangsui, the wife of Vanke Chairman Wang Shi, bought Vanke shares. The profit in three days was close to 10%, and the final profit exceeded 30%. According to the current regulations, her purchase of Vanke shares is not illegal. In July 2007, the website of the Shenzhen Stock Exchange disclosed that Wang Jiangsui, wife of Vanke Chairman Wang Shi, purchased 46,900 A-shares of "our own company".In that month, Vanke announced the good news that its sales performance in the first half of the year had increased significantly, and the share price of Vanke A rose all the way.The behavior of the chairman's wife caused widespread controversy. In the end, Wang Jiangsui handed over all the proceeds to the company.Wang Shi apologized in his blog, but denied insider trading.Wang Shi's attitude has been forgiven by many stockholders, and the Shenzhen Stock Exchange also stated that what Mrs. Wang Shi did was not against the rules.However, there are opinions that stock trading by relatives of executives is neither normal nor an exception, which reflects the loopholes in the stock market regulatory rules.

So today I will talk to you about the issue of supervision. The China Securities Regulatory Commission and other institutions simply understand supervision as suppressing bubbles. On May 31, 2007, the stamp duty was raised to three thousandths, and new funds were not allowed to enter the market, which is to suppress the overheated stock market.This approach itself is wrong, where is the mistake?In the advanced countries represented by the United States, their securities regulatory authorities will never crack down on stock market bubbles, because this is not within their scope of power, and let me tell you again, there is no institution, no individual, and no expert or scholar in the world Know, how to determine the stock market bubble.

So for the US Securities and Exchange Commission, what it does is to severely crack down on illegal behavior in the stock market, such as insider trading, stock price manipulation, etc., but it does not touch bubbles, because the US Securities and Exchange Commission has no Authorized to control bubbles.So today our supervision is just the opposite of others. What we do is: the stock market has a bubble, so quickly increase stamp duty and prohibit new funds from entering the market;This is equivalent to the government manipulating the stock market.this is not right.what should you doWe should strictly supervise our most "beautiful" retail investors and investors including fund institutions. The purpose of supervision is to protect small and medium-sized shareholders to have a fair and just trading environment.

Then you may ask, we have no evidence for individuals like Ren Huaixiu and his wife, Liu Fang, etc., and we can't find it!How to supervise it? Ladies and gentlemen, is it really impossible to find out or not to check at all?So this involves the basic spirit of supervision.So I would like to ask the people across the country, how do you define insider trading? Insider trading is the enemy of the securities market and is explicitly prohibited by laws around the world. In 2007, Wang Xiujie, the once famous "leader brother", was arrested for illegal business operations. He collected membership fees through the Internet, and the amount involved in the case reached tens of millions of yuan.The pretense he relies on is to reveal "inside information."The changes in the stock market seen by stockholders, such as the sudden surge before the announcement of the news, and the continuous daily limit after the resumption of trading, are often related to this.As my country's securities market is in its infancy, topics such as overall listing, reorganization, and asset replacement emerge in endlessly, and a large amount of information that has a significant impact on stock prices provides a hotbed for insider trading.

The theoretical definition of insider trading is to use one's own special information to make profits in the stock market.In actual operation, how should insider trading in the stock market be defined?Let me define it for you.Assuming that a certain company announces good news at 3 o'clock today and the stock price rises, then, before 3 o'clock, all transactions that drive the stock price up are all insider transactions.But before 3 o'clock, there are many insider transactions that drive up the stock price. There are tens of thousands of them. Which one do you catch?This is the case in the United States, just grab one and make a model.After being caught, use the power of the US government to file a lawsuit against you until your family is destroyed and your wife and children are separated.

In the United States, this matter is very interesting. Once caught by the US Securities and Exchange Commission for insider trading, do you know what the caught person will do?Immediate divorce.In case of divorce, his wife can still keep half of the property.What about after being convicted?Moved to live in Florida.Because the US "Bankruptcy Law" stipulates that once you are convicted and declared bankrupt, if you stay in New York, you can only keep a house worth tens of thousands of yuan and a car worth less than a few thousand yuan.But it would be nice to go to Florida. On the surface, you can only keep a house and a car, but the value is not limited.You can buy an expensive house, an expensive car, and your wife still has half of the property.This is what happens when the US catches insider trading, that's what they do.

At the beginning of the establishment of the US securities market, insider trading was rampant, so the "Securities Act" and "Securities Exchange Act" were passed in 1933 and 1934 respectively, strictly prohibiting insider trading.And the United States Securities and Exchange Commission (SEC) was established in the first year, the first chairman Joseph?Kennedy closed 12 small stock exchanges and investigated more than 2,300 securities fraud cases. Since 1984, the United States has successively issued several laws on insider trading, imposing a three-fold fine on those who benefit from inside information. The individual fine is between 100,000 and 1 million U.S. dollars, and the legal person can be fined 2.5 million U.S. dollars and can be imprisoned at most 25 years... Severe punishments and laws have made the stock market in the eyes of Americans completely different from the stock market in the eyes of our stockholders.

When we talk about the most "beautiful" retail investors, I believe all guests will ask, is it possible that these most "beautiful" retail investors are really capable and can really use basic analysis or technical analysis to judge whether a stock is good or bad, and then enter The market makes deals?I personally think this point is worth discussing.I would like to give you an example. Fund managers in the United States abide by the law in the United States, but when they arrive in Hong Kong, they start manipulating stock prices and doing insider trading. What is the reason?In the United States, the inevitable result of using funds to buy a certain stock, or due to the huge amount of funds, the price of this stock immediately rises, the stock price rises, or bad luck, the good news will be announced two days later.Excuse me, what crime have you committed according to my inference?For the crime of insider trading, at this time the Securities and Exchange Commission asks you to explain whether you knew there was good news when you bought the stock. If you want to prove that you did not know, you have to produce your research report to prove your innocence.This has a consequence. These fund managers basically do basic research in the United States because they are afraid of being caught.Since you have done basic research and since the value of the stock is underestimated, you cannot sell it immediately after buying it. You must make long-term investment, which forces you to make long-term investment. Foreign investors engage in basic research not because they want to do so, but because they want to respond to investigations by the Securities and Exchange Commission.This is the SEC's requirement of the defense's evidence, and he can only do so.Of course, he would not do this in Hong Kong, because Hong Kong does not have this law, so Americans come to Hong Kong to do insider trading, manipulate stock prices... everything, and the methods are very high.Our QFII originally wanted to introduce these foreign investors, and hoped that after they came to China, they could also make long-term investments and do basic research like they did in the United States.But I tell you, it's impossible.There is no such law in China today, and he will never do this.How good it would be for him to be a banker! QFII is to introduce these more powerful market makers to China, and stockholders will suffer again. This is the conclusion. Cracking down on insider trading depends on the law, and cracking down on insider trading on a global scale only appeared in the 1990s. In the late 1980s, the insider trading scandal on Wall Street shocked the whole world. Young white-collar workers were taken away from the office in handcuffs, which became a memory of a generation.Immediately, the European Union mandated that its member states enact stricter laws against insider trading. In 1998, countries such as Malaysia, India, Vietnam, Egypt and the Netherlands announced to strengthen the supervision of insider trading. In May 2007, the China Securities Regulatory Commission determined that Chen Jianliang, deputy general manager of Tianshan Co., Ltd., had engaged in insider trading activities in violation of regulations, fined him 200,000 yuan, and banned him from entering the market for 5 years.This is the first case of insider trading investigated and dealt with by the China Securities Regulatory Commission, and how to define insider trading has become a hot topic of discussion. So how to catch insider trading?This is very interesting.I still remember a case committed by a Hong Kong citizen. At the end of 1997, this Hong Kong native heard the news that the Marriott Hotel in the United States would be acquired, so in early January 1998, he went to the United States to buy a lot of stocks.On the afternoon of January 3, the company suddenly announced good news, and the company's stock price soared.He made more than 100 million US dollars because he bought the shares of Marriott Hotel in advance. How do you catch it?If you put it in our mainland, you won't catch it, because you don't understand supervision at all.But let me tell you how to catch it in the United States: on the third day, the U.S. Marshals came and confiscated the passport first.Then the subpoena came, and it was sent to the US court in June to be prosecuted for insider trading.Well, the following plot is of course a fiction I made up to make a show for you.This man must go to a lawyer and say that he bought this stock purely by luck.Why would I buy it?Because my wife and I didn't quarrel, we were in a good mood, and it didn't snow in New York, so we were in a better mood, so we bought it.Who knew that luck would be so good, just to meet good news and so on.Too good, the most "good" retail investors. If you really check, you will find that he and his wife really didn't quarrel, because his wife is not in New York, of course they didn't quarrel.Second, it’s true that it doesn’t snow in New York. It seems that he really didn’t lie to you, so why can’t he buy stocks?Let me tell you, it is possible in China, but not in the United States.You know what the lawyer will tell him?Comrade, you are completely mistaken, and you should not do this in the United States.Today, you have to prove that when you bought these stocks, you didn't know that there would be good news announced the next day.You have to take this out.Students, how can he prove it? Let me make an analogy, guests at the scene, students, if you are asked to prove that you and your girlfriend went to the movies last week, this is a good proof, you take out the movie ticket stub, or I tell you the movie plot, Doesn't that prove it?So think about it, how do you prove that you didn't watch a movie last week?It is extremely difficult to prove, because you have to have witnesses to prove that you did not watch the movie anytime, anywhere, it is very difficult.If you can't prove it, then you are guilty, and this is America.Therefore, the Hong Kong man could not prove that he did not know that the stock price would rise the next day when he bought the stock.He can't prove it. If you can't prove it, you will be guilty of insider trading.It's that simple.Therefore, contrary to the common sense of law that you have learned, the guests at the scene probably have studied law. Usually, the law assumes that you are innocent first, unless the prosecutor or the court proves that you are guilty, you are guilty.You are innocent until proven guilty.But let me tell you, that's criminal law, and the U.S. securities exchange law is just the opposite.Its philosophy is that as long as you trade stocks, you are guilty unless you can prove your innocence.If you can't prove it, it's insider trading. The U.S. Securities and Exchange Commission uses this deterrent method to keep you from committing crimes.Since it is very difficult to prove innocence, why ask you to prove it?It is because of the difficulty that you are asked to prove it, so that you will not dare to do it again next time.So once you get caught by the SEC, your life will be very difficult. The U.S. Securities and Exchange Commission has operated for more than 70 years, and its professionalism, speed and integrity are impressive.In recent years, the number of cases investigated by the Securities and Exchange Commission has stabilized at around 50 per year, such as 57 in 1999, 56 in 2003, and 53 in 2005.With the deepening of economic globalization, such events are getting closer and closer to us, such as the insider trading incident of Hong Kong Bank of East Asia Chairman Li Guobao that broke out in May 2007. Recently, the case of Li Guobao of the Bank of East Asia has become an uproar.Li Guobao is a very well-known banker in Hong Kong and the chairman of the Bank of East Asia. He was charged with insider trading by the US Securities and Exchange Commission.Do you know what he did?It seems that he flew from Hong Kong to Beijing. I don’t remember much. There was a person on the same plane with him. I don’t know if they talked, but after a while, this person committed insider trading in the United States. The US Securities and Exchange Commission will check who told you this news?Looking back, I found that Li Guobao knew the news in advance. Li Guobao knew the news, and he didn't necessarily tell him when he met this person on the plane. Why did you say he was guilty?Li Guobao knew the news. If he went to speculate in stocks by himself, you could say he was insider trading, but he didn’t. He just took this flight, which happened to be the same flight as the insider trader.But the US Securities and Exchange Commission believes that Li Guobao has committed the crime of insider trading, unless he can prove that he did not speak to this person while flying.How can he prove it?Just as it is very difficult to prove that you did not watch a movie last week, it is very difficult to prove this.what do you say?I didn't tell him, I swear, I didn't buy stocks myself, I didn't make money, I didn't have insider trading... It's not important to say that, what is important?You are on this flight, and the insider trader is on the same flight, then you are guilty.This is the harsh law, and its deterrent force makes you dare not engage in insider trading.What about us?Liu Fang was able to make 42 daily limits in a row, so she was not arrested! There are indications that the China Securities Regulatory Commission is constantly increasing the intensity of supervision. On February 4, 2008, the "Hangxiao Steel Structure Case", known as "the first case of insider trading in the bull market", was sentenced in the first instance. The three defendants were sentenced for the crime of leaking inside information. In addition to recovering illegal gains, they paid a total fine of 8,000 yuan. More than ten thousand yuan.However, the unresolved Liu Fang incident and the appearance of Ren Huaixiu and his wife show that the road to supervision is not smooth.The industry has always believed that there are three major problems in the investigation and punishment of insider trading: the difficulty of finding the behavior, the difficulty of inspection and investigation, and the difficulty of producing evidence in court, and the change in the way of producing evidence is the key to solving the problem. Like Ren Huaixiu and his wife, according to the information we have collected, Ren Huaixiu once worked as a consultant in SST Digital, and this company once introduced ST Salt Lake for restructuring.Based on this alone, if you are in the United States, you will not be able to tell. You must be able to prove that you did not use the relationship at that time to make money. If it cannot be proved, it is naturally insider trading.Moreover, in the United States, insider trading is a very serious crime. It is the most serious crime that the US Securities and Exchange Commission cares about and cracks down hardest. It is even more serious than manipulating stock prices.Because you're unfair, unjust, because you can profit, that's the SEC's top guiding principle.The transaction must be fair and just. In order to achieve a fair and just transaction environment, they used the power of deterrence.The law enforcement power of the SEC is not the power conferred by the federal law as you think, but the power conferred by the U.S. Constitution, the purpose of which is to protect the maximum rights of small and medium shareholders.Using this method of inverting the burden of proof, the US Securities and Exchange Commission investigates and punishes insider trading and manipulation of stock prices, thereby protecting small and medium shareholders. Look at the case of Liu Fang, as long as you are involved in 42 consecutive daily limit boards, and Fiyta is also involved in 100% insider trading, if you cannot prove your innocence, you are guilty.Think about it again, everyone, I said at the beginning of the program that what the regulators have to do is that simple, use your power to track down insider trading, track down stock price manipulation, because this is the most important thing that prevents us small and medium investors from making money reason. Audience: Hello, I would like to ask about the severe punishment laws in the United States that you mentioned just now, that is, the means to regulate the securities market.Can you give another example of how strict US law is when it comes to backroom deals? Lang Xianping: Very good, the United States caught insider trading, there are two ways to deal with it.First, if you immediately plead guilty and surrender, you will be fined.If you plead not guilty, you will be punished by criminal law.Therefore, in 99% of cases in the United States, the parties surrendered immediately as soon as they were caught by the Securities Regulatory Commission. What is the benefit of surrendering?The SEC is happy to declare victory. After you surrender, the U.S. government will not sue you in civil procedure for your surrender.This makes 99% of the cases resolved by the surrender of the parties involved, so why did Li Guobao surrender, because surrender is the easiest way, and the United States will not pursue you again.If you don't surrender, the outcome is uncertain. If you win, it's okay, but if you lose, you will be punished by criminal law.The punishment of this criminal law is very terrible. If the situation is serious, it will be very troublesome.For example, if you have been fined many times, or the circumstances are serious, if you surrender to the Securities and Exchange Commission and refuse to accept it, you have to go to court.The consequences are unimaginable. It is very painful and difficult for you to sue the US government. The United States takes the crime of insider trading too seriously, while China takes it too lightly.In my opinion, in order to protect small and medium shareholders, the punishment for the crime of insider trading should be more severe than light. What should we do next?I think it is necessary to change thinking in terms of supervision, but I don't want to change too much, it is best to do it step by step.Let me speak on behalf of the small and medium-sized investors first. I beg the regulators, please don’t suppress the stock market, and don’t boost the stock market. Don’t do anything, just catch the most “beautiful” retail investors in our program.Utilize all your energy, govern them with clean evidence, and restore the most natural and fair market to us.When the bubble bursts, it bursts. I believe stockholders are willing to accept this result, but it is not you who burst the bubble.Because price fluctuations should not be suppressed, and price fluctuations cannot be subject to administrative manipulation, this is called true marketization.And what should the government do?There must be supervision, including the supervision of Liu Fang, Ren Huaixiu, etc., because only in this way can small and medium shareholders be protected.