The Determination Of Inside Information In Security Market

A mature,perfect and effective security market should be able to fully transmit securities-related information,and at the same time allow investors to have equal access to securities information,so that the market can continuously enhance the confidence of securities investors on security market and promote the development of the financial market.If some people obtain inside information with their special status or opportunity and thus profit,which deprives equal opportunities for competition of other investors in the security market and violates the principle of fair and open of security market.In order to maintain the fairness and transparency of the security market,we have gradually developed an information-disclose-system and a ban-on insider trading systems.The information disclose system interacts with the prohibition of insider trading.First of all,the company should disclose the information that has an important impact on investors;Secondly,in the event that the company does not disclose the inside information,the people who are aware of the information are forbidden to trade the security of this company.The prohibition of insider trading system is actually an after-the-fact supplement to the information disclose system in the securities law.Because the disclosure of inside information is before-the-fact measures,in the event that the company does not perform the obligation of disclosure,the prohibition of insider trading system shall be applied.An important prerequisite for insider trading is the existence of inside information.So what kind of information is inside information? The accurately defining of the concept of inside information is of great importance to the regulation of insider trading.As one of securities fraud,inside trading undermines the principle of fairness,justice and openness of the security market,damages the interests of the majority of investors,which is not good to the maturity and improvement of the security market.With the development of China's security market,there are increasing number of security trading activities in the security market,and the imperfection of the legal supervision system of China's security market,the insider trading and other criminal activities are inevitably showing up,which seriously disrupts the China's capital market and security market.The elements of insider trading are transaction subject,inside information and trading behavior.Inside information is one of the most important elements which has extremely important significance for the correct identification of insider trading and it is indispensable for the improvement of China's domestic inside information regulation system.Therefore,this paper aims to improve the legislation of domestic trade regulation by analyzing and summarizing the definition of inside information in the world.The theme of this paper is “the determination of inside information in the security market" which is mainly based on the incident of “Guangda event”,in order to explore how to determine the insider trading in China's theoretical and practical circles.Inside information is a very important legal concept and it's a basic component of determination of insider trading.However,inside information is not clear in theory and practice area,so it is necessary to explore its criteria of determination of inside information through legislation,justice,and supervision.This paper takes the legislative provisions and jurisprudence of inside information in few major countries and regions as data base,summarizes the criteria for identifying inside information,and refines the requirements of the identification standards to re-examine China's legislative provisions and related practices on inside information.In addition to the introduction and conclusion part,this paper is divided into five chapters,which are briefly introduced as follows:The first chapter: the significance of inside information in the security market;there are different opinions on the determination of "significance" of inside information in China's theoretical circles: “the price sensitivity standard” and “the rational investor standard”.The price sensitivity standard is further divided into“subjective price sensitivity standard” and “objective price sensitivity standard”.In this part,this paper mainly analyzes the irrationality of “objective price sensitivity standard” as the criteria of judging the significance of inside information.Through the analysis of the other two standards,it is pointed out that "subjective price sensitivity standard" and "rational investor standard" are actually two aspects of one problem,which are essentially unified.The second chapter: the non-publicity of inside information in the security market;as for the form of disclosure of inside information,two forms have been adopted: “formal disclosure” and “substantial disclosure”.This paper analyzes the advantages and disadvantages of the two standards and their application to different security markets separately,so it is recommended that China should adopt the "substantial disclosure" standard.The third chapter: the correlation of inside information in the security market;this paper divides the information in the security market into non-official information,official information and others.The non-official information should be generally recognized as inside information because it's always influence the security price while external information should generally be considered as non-inside information,but in special cases it can also be considered as inside information.Chapter 4: The certainty of inside information in the security market;different countries have adopted different attitudes towards the certainty of inside information.Some countries,such as the United States,does not take the certainty as an element specifically,but take it into consideration while judging the significance of inside information.Some countries have separately take "certainty" standards in legislation or administrative regulations.Chapter 5: based on all the analysis done in the four chapters above,this paper puts forward some suggestions for the legislation on insider trading and determination of inside information.China's legislative provisions on insider trading are mainly in the Securities Law,the Company Law,the Criminal Law,and other related administrative regulations or departmental rules.In the view of its development background,the regulation of insider trading in China's legislation is produced and developed in the background when the domestic security market has just started and the experience of theory and practice is insufficient.At the beginning of its creation,the international anti-inside trading legislation also ushered in a small climax.Since China's security market has just started,there are many foreign legislative experiences to draw on;but China's legislation on insider trading regulation is complicated because of slow beginning and development.The process of a country's legislation becoming mature must be a process of constantly summing up experience,learning from the lessons of the predecessors,and constantly improving.Based on the research and analysis done,combined with the legislative experience of other countries,this paper puts forward the following suggestions for the legislation of determination of inside information:Since the majority in China's security market is ordinary investors who generally do not have professional background knowledge.Therefore,in order to unify the way and time of inside information disclosure,this paper suggests to modify "not yet public" in Article 75 of "Securities Law" to “not yet disclosed in accordance with the law",and then authority the State Council to make specific provisions on the way and time of "opening according to law."Although China's Securities Law does not stipulate the standards for the disclosure of inside information,from the provisions in the Guidelines we can see that China intends to introduce "substantive disclosure standards" in practice.But in order to apply the law and unify the legal system,this paper proposes to add the following provision in the Securities Law: The time of disclosure of inside information is when48 hours after the inside information is disclosed on the media designated by theChina Securities Regulatory Commission.Apply the certainty standard in the determination of the inside information.The certainty standard requires that the relevant information be recognized as inside information on the premise that the relevant information must be certain and clear,so rumors and unfounded information in the market are not within the scope of inside information.On the other hand,the relevant information does not need to contain all the details but only the details which are necessary to recognize the certain information.The research on the determination of inside information is theoretical and practical.In view of the legislation of inside information,this paper has studied the laws,precedents and academic research results of relevant countries.The research methods used in this paper are mainly:(1)Comparative research;(2)Normative research.