Professor Weng Xiaochuan (Charlie) attendedThe 5th International Conference on “New Haven and other

Professor Weng Xiaochuan (Charlie) attendedThe 5th International Conference on “New Haven and other Jurisprudential Perspectives on Conflict Resolution and Current Legal Problems” on 17th Sep. and 18th Sep. at CityU Law School in Hong Kong.

The conference is a highly prestigious international legal scholar forum co-organized by the Yale Law School and City University of Hong Kong School of Law. The presenters include former head of law department at European University Institute, scholars from tops US law school and top Asian Law Schools. The Vice President of the Supreme Court of China and Chief of Justice Department of Hong Kong delivered speeches for the opening and closing ceremonies. 25 Justices from China also attended the conference and gave comments.
 
 
Professor Weng presented his very recent paper on the case study of Chinese insider trading law, which was proved to be a very successful one. Professor Weng receives positive comments from justices and scholars on the conference. The topic of the paper is “Who is an Insider? A Case Study on Chinese Insider Trading Enforcement Principles.” It argues that major jurisdictions in the world treat insider trading as a major securities violation. These jurisdictions have promulgated regulations in order to rein in insider trading. Jurisdictions with more rampant insider trading tend to enforce prohibitions more strictly. China launched her capital markets and enacted insider trading prohibitions two decades ago. Although the legislature and market regulator have modified these prohibitions several times, the rules are still vague. Because enforcement of these broad-brush insider trading regulations is largely unexplained, an administrative sanction case study is helpful in understanding the market regulator’s enforcement principles. Such a study will be especially helpful in clarifying China’s approach to identifying insiders.  
 
Many developed countries have extensive insider trading enforcement histories. Regulatory agencies in various countries have repeatedly modified the principle of culpability for trading on undisclosed information. For example, two decades ago America’s SEC changed from a fiduciary duty approach to a misappropriation approach in order to cope with social and economic changes. These new approaches were brought forth either by agencies or by binding precedents. However, Chinese agencies and courts have never clarified their enforcement principles. These entities have merely preached their aversion to insider trading. This Article will use principles abstracted from developed countries to examine the continuity of insider trading enforcement from various cases in China. This Article will then argue that Chinese enforcement principles are inconsistent. Through statistical analysis of enforcement data from the past ten years, this Article will conclude that the current policy-orientated enforcement approach does not improve market fairness or rule of law. Regular legislative review is necessary to ensure that enforcement does not become too excessive in a given equity market. Additionally, enforcement agencies should pay more attention to controlling shareholders and bureaucrats with inside information. Under China’s unique ownership system, these players may be a major force in insider trading.
This Article does not merely compare China’s enforcements with those of developed counties. Nor does the Article blindly graft identification approaches from other jurisdictions onto China’s system. Rather, this Article believes that the philosophy of the New Haven School is crucial to improving the enforcement of insider trading prohibitions. Just as Professor Robert Post said, the jurisprudence of the New Haven School has “become an essential way to conceive the legal enterprise to assist those who seek legal or policy advice in clarifying goals, and in implementing them in ways compatible with the common interests of the most inclusive community”. This Article takes the common social welfare as its paramount consideration. The legislation proposed here is built on the idea that insider trading identification approaches should be determined by the needs of society, rather than by those of the market regulator or the administrative agencies. Therefore, this Article suggests a regular assessment of the appropriateness of the identification approach. This assessment should be based on societal needs and demands. Simply sticking with current law and thereby leaving excessive discretionary power to an administrative agency is dangerous and improper. Now the paper is under consideration of the journal of the law school.
 
 

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