Changan Auto-Huawei Deal Insider Trading: 5 Employees Fined $23M for $570K Illegal Profits

On November 26, 2023, Changan Automobile announced that it had signed a Memorandum of Understanding on Investment Cooperation with a well-known technology company, planning to launch a strategic partnership in the field of intelligent vehicles. Prior to the official announcement, market rumors about the deal had already circulated, driving Changan Automobile’s share price to rise consecutively starting from November 23. The stock hit its daily trading limit on both November 27 and 28. Regulatory authorities investigated and found that five individuals—Han, Peng, Jie, Wei, and Wang—had purchased substantial amounts of Changan Automobile shares using material non-public information before the announcement of this significant event. All five were employees of either Changan Automobile or its partner (later confirmed as Huawei). Their trading occurred during the sensitive period when the inside information was not yet public, and they had contact or communication with insiders who possessed the confidential information. Specifically: - Han bought shares on October 13 and November 6, 2023, realizing profits of RMB 2.1 million; - Peng and Jie jointly operated multiple accounts to purchase shares between November 6 and 14, earning RMB 1.01 million; - Wang bought shares on October 30, gaining RMB 340,000; - Wei purchased shares on November 3 and 17, making RMB 540,000 in profit. In total, the five individuals spent RMB 61 million on these trades and collectively gained approximately RMB 4 million in illicit profits. The China Securities Regulatory Commission (CSRC) determined that their actions constituted insider trading. It ordered the confiscation of all illegal gains and imposed fines totaling RMB 16.69 million: - Han was fined RMB 10.5 million; - Peng and Jie were jointly fined RMB 3.04 million; - Wang was fined RMB 1.5 million; - Wei was fined RMB 1.64 million. Han and Wei have fully paid their penalties and disgorgement amounts. Clues suggesting potential criminal conduct have been referred to public security authorities. The material non-public information was formed no later than September 6, 2023, and was officially disclosed on November 26, 2023. The defendants’ arguments in defense were not accepted by regulators. The China Securities Investor Services Center (ISC) noted that this case exposed deficiencies in insider information management and employee compliance training at the companies involved, with some individuals even engaging in illegal trading together with their spouses.