Dong Mingzhu, who has just been re-elected as chairman of Gree Electric Appliances (000651.SZ), may have been targeted by regulators for leaking undisclosed major information before she could share her joy.The next step for leaking information in violation of regulations is that Dong Mingzhu may face dual penalties from the China Securities Regulatory Commission and the Shenzhen Stock Exchange.
Dong Mingzhu, who has worked for Gree Electric Appliances for more than 28 years and has served as a company executive for many years, should be very familiar with the core financial data release process of listed companies.But Dong Mingzhu, who has the characteristics of an Internet celebrity and is outspoken, got into big trouble this time.
If regulators continue to pursue accountability, it will undoubtedly cause huge uncertainty to Gree Electric investors.As of the close of trading on January 18, Gree Electric had not responded to the Shenzhen Stock Exchange’s inquiry.
Inquiry for leaking undisclosed material information
Dong Mingzhu, who was happily elected as chairman, may not have expected that a word would cause a leak.Dong Mingzhu said in response to shareholders' questions at Gree Electric's first extraordinary shareholders meeting in 2019 on January 16: Gree Electric's revenue is expected to reach 200 billion yuan in 2018, and its after-tax profit is expected to exceed 26 billion yuan.
One day later, the Shenzhen Stock Exchange sent a letter of concern to Gree Electric: Your company held a shareholders’ meeting on the afternoon of January 16, 2019. Your company’s chairman announced at the shareholders’ meeting that the after-tax profit in 2018 was 26 billion yuan and other relevant information about your company.Performance remarks, but your company only released a performance announcement in the evening that day.According to Article 2.15 of the Stock Listing Rules of the Shenzhen Stock Exchange (revised in 2018), listed companies and relevant information disclosure obligors shall not disclose or leak undisclosed material information through press releases or answering reporters’ questions in any other manner before announcing it in designated media.The chairman of your company made the above remarks earlier than your company's announcement in the media designated by the China Securities Regulatory Commission.The Shenzhen Stock Exchange expresses concern about this and asks your company to strictly regulate the behavior of directors, supervisors and senior managers in releasing information to the outside world, effectively improve the awareness of information disclosure, and comply with and urge relevant personnel to comply with the stock listing rules and other relevant regulations of the Exchange.
Analysts from Investor.com contacted Dong Mingzhu multiple times on January 18 and sent text messages to inquire, but did not receive a reply as of press time.Gree Electric's insiders responsible for shareholder affairs only said that the company had seen the letter of concern and asked investors to pay attention to the company's announcement and response.As for the appropriate release of the announcement, the person said it was unclear.On January 18, Gree Electric's share price rose 0.80% to a closing price of 38.97 yuan.
According to multiple media reports, Wang Jingdong, Gree Electric’s secretary to the board of directors, was quoted as explaining on the spot that when Dong Mingzhu disclosed the company’s 2018 performance information, the stock market was closed, so it did not constitute a disclosure violation.
Perhaps realizing that Dong Mingzhu’s early colloquial announcement of performance was inappropriate, Gree Electric Appliances disclosed a performance forecast on the evening of January 16. It is expected to achieve operating income of 200 billion yuan to 201 billion yuan in 2018, which is significantly higher than the 150 billion yuan revenue of the previous year.Growth; achieving net profit attributable to shareholders of listed companies of 26 billion to 27 billion yuan, a year-on-year increase of 16% to 21%.
Why are Dong Mingzhu and Dong Mi wrong?
Song Yixin, a lawyer at Shanghai Hanlian Law Firm, told Investors.com analysts: Dong Mingzhu’s remarks are obviously illegal.
Song Yixin pointed out that Dong Mingzhu’s remarks were similar to those of the previous Hangxiao Steel Structure (600477.SH), in that executives casually announced specific performance at the meeting, which was a very obvious violation.If compared with Hangxiao Steel Structure, the China Securities Regulatory Commission is likely to punish Dong Mingzhu, including fines and punishment decisions, and the Shenzhen Stock Exchange may also impose disciplinary sanctions.
Song Yixin is even more wrong about what Wang Jingdong, the secretary-general of Gree Electric Appliances, said.He emphasized that the biggest problem is that the performance disclosure of listed companies should be disclosed in designated places through formal announcements, which is nothing more than the exchange's website and designated media. This is the key.The characteristic now is that due to the development of the Internet, the exchange's disclosure comes first and is published in the newspaper the next day. There is no doubt about this.
It would also be absurd to argue that such disclosure was not made during trading hours because the information was disclosed in the wrong manner.Listed companies can disclose before, during or after the market, there is no problem. The key is to use formal announcements and make disclosures on prescribed occasions.Song Yixin said.
If compared with the Hangxiao Steel Structure leak case, Dong Mingzhu may face punishment for leaking inside information.The Hangxiao Steel Structure case is known as the first case of leaking inside information in my country.On February 12, 2007, Luo Gaofeng, then deputy director and securities affairs representative of Hangxiao Steel Structure Securities Office, revealed to others the news that the Angola project involved an amount of 30 billion.On February 15, Hangxiao Steel Structure issued an announcement stating that the company is negotiating with relevant owners for an overseas construction project. The overall intended project involves a total amount of approximately RMB 30 billion. The intention will be implemented in phases, with a construction period of approximately two years.If the company participates in this intended project, it will have a significant increase in the company's performance in 2007.
The China Securities Regulatory Commission determined that February 8 to February 14 was the price-sensitive period for inside information about the Angola project.In the end, the China Securities Regulatory Commission issued administrative penalties for the case: Hangxiao Steel Structure was given a warning and fined 400,000 yuan; Luo Gaofeng and others were given warnings and fined 100,000 yuan.On February 4, 2008, the court ruled that Luo Gaofeng was guilty of leaking inside information and was sentenced to one year and six months in prison.
Investors can claim compensation if they are damaged by this
Li Jian, a lawyer at Zhejiang Yufeng Law Firm, said that Dong Mingzhu introduced at the shareholders' meeting that the after-tax profit in 2018 was 26 billion yuan, which was earlier than the performance forecast of the listed company, and was obviously suspected of violating regulations.Fortunately, his remarks were published after the stock closed, and the company issued a performance forecast that night to save the situation. Otherwise, Dong Mingzhu may face regulatory measures, warning letters or penalties from the stock exchange, or even be punished by the China Securities Regulatory Commission.
Li Jian further pointed out that according to Articles 74, 75 and 76 of the Securities Law, the Information Disclosure Management Measures of Listed Companies, and the relevant provisions of the Shenzhen Stock Exchange Stock Listing Rules, listed companies and their executives should strictly abide by the law, be cautious in their words and deeds, and the company’s after-taxThe profit of 26 billion yuan before it is disclosed in accordance with the law is certainly a major event and inside information, which is enough to affect the company's stock price and investor decision-making.
Song Yixin said that if the China Securities Regulatory Commission imposes penalties on Dong Mingzhu and Gree Electric, the losses caused to investors can be claimed through law.
Article 4 of the Measures for the Administration of Information Disclosure of Listed Companies stipulates that before insider information is disclosed in accordance with the law, no insider shall disclose or leak the information, or use the information to conduct insider trading.
Article 6: When listed companies and other information disclosure obligors disclose information in accordance with the law, they shall submit the announcement draft and relevant documents for reference to the stock exchange for registration, and publish them in the media designated by the China Securities Regulatory Commission.The information disclosure obligor shall not release information on the company website and other media before the designated media, shall not replace the reporting and announcement obligations that must be performed in any form such as press releases or answer questions from reporters, and may not replace the temporary reporting obligations that must be performed in the form of regular reports.Reporting obligations.
