Times Observer: Crack Down Hard on Listed Companies That Hype Hot Topics and Speculate on Concepts

Securities Times Reporter Cheng Dan

Since the beginning of this year, with the rising popularity of brain-computer interfaces, commercial spaceflight, and other sectors, some listed companies have attempted to boost their stock prices by attaching to concepts through interaction platforms, announcements, and other channels. Recently, multiple listed companies have received hefty fines for riding the hot topics. The penalties target not only the involved companies but also hold accountable the actual controllers, directors, and senior executives—the “key minorities.”

The China Securities Regulatory Commission (CSRC) has a clear and firm stance: any behavior that harms investors’ interests under the guise of hype or riding the hot topics will be investigated and dealt with strictly and promptly, with no leniency. Notably, the crackdown on concept hype is accelerating, with many cases being filed and penalized in just over a month. Fines in individual cases can reach hundreds of thousands of yuan, and joint accountability measures are being implemented to curb the chaos of concept speculation with strong measures.

Despite the regulatory authorities maintaining a high-pressure stance, the phenomenon of riding the hot topics persists. Some “key minorities” continue to act despite knowing it is wrong. The core issue lies in the imbalance between the costs and benefits of illegal activities in China’s capital market; administrative penalties alone are insufficient to serve as an effective deterrent.

Legally, the behavior of riding the hot topics by listed companies is often classified as “misleading statements,” which falls under information disclosure violations. Criminal accountability mainly relies on Article 161 of the Criminal Law, which pertains to “illegal disclosure or non-disclosure of important information.” However, due to the strict conditions required for this crime, it is difficult to establish and rarely leads to criminal prosecution. According to current regulations, accountability requires “large amounts involved, serious consequences, or other serious circumstances,” such as inflating assets, revenue, or profits by more than 30% in the current period, or failing to disclose major matters that account for more than 50% of net assets. Only then can criminal proceedings be initiated, with a baseline penalty of up to five years in prison or detention. Additionally, difficulties in establishing subjective intent and complex causality proof create procedural barriers, resulting in many hot-topic riding cases remaining at the administrative penalty stage, with few criminal prosecutions.

In mature capital markets, false statements and concept hype are classified as securities fraud, with criminal accountability normalized. For example, in the U.S. market, responsible individuals can face up to 25 years in prison in addition to substantial civil damages. For instance, a biotech company CEO was sentenced to 30 months in prison and had all illegal gains confiscated after fabricating drug development progress and cashing out at high points based on hype, under charges of securities fraud and insider trading. The severity of such punishments deters market participants.

Faced with enormous profit incentives, the relatively low cost of violations encourages some listed companies to take risks. Only by further strengthening the criminal enforcement mechanism, lowering the threshold for criminal accountability, and holding the “key minorities” accountable can the true cost of riding the hot topics be increased. This will fundamentally purify the market environment and effectively safeguard the legitimate rights and interests of the majority of small and medium investors.

(Edited by: Wang Zhiqiang HF013)

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