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Introduction: Behind the scenes of the arrest of many financial Somebody(Big Vipfamous person) who once made a name for themselves on social media, we have seen the gradual exposure of the gray interest chain of "Market value management". Where are the legal boundaries of market capitalization management? What trends will the private equity industry see in the future? This issue will attempt to briefly answer the above questions.

On March 21, 2022, the "Prosecutorial Daily" published a typical case: some financial white-collar workers who have spare money and want to invest, follow the expert Mr. Xu, who is known as a "private equity expert",to manage their finances online.Mr.Xu has more than 400 Thousands of fans were suspected of"playing the people for a sucker ". Fans reported the case after they found it unreliable, which eventually led to the arrest of Mr.Xu. Prosecutors charged him with illegal business operations, aiding in online information criminal activities and false advertising, with illegal gains exceeding 1.5 million yuan. At present, Mr.Xu has pleaded guilty and accepted punishment and signed a affidavit.

Coincidentally, in September 2021, Mr.Ye, who is also a big private equity like Big V, was arrested for allegedly manipulating the market. Mr.Ye was previously a well-known private equity fund trader. He entered the capital market with 20,000 yuan in 1994. In 2007, he won the first place in the private master competition in the Chinese stock market. In 2010, he served as the general manager of a private equity fund. ". Mr.Ye was accused of actively helping Liu X-ye's criminal gang, who was suspected of manipulating stocks such as Nanling Civil Explosion by means of concentrated capital advantages, shareholding advantages, and continuous trading, and illegally made tens of millions of yuan.

Mr.Ye, Mr.Xu and other financial big experts who once made a name for themselves on social media have been arrested one after another, and behind the scenes that a considerable number of investment institutions have been fined heavily for violating private equity regulations. It  is the so-called process of gradual exposure"on market value management" gray interest chain.

Market value management refers to “A strategic management behavior that maximizes the company’s value through top-level strategic design, improved business management, appropriate capital operation and effective investor relationship management with the goal of promoting the steady growth of the market value of listed companies.” .

From this definition, market value management has its legitimacy. It is for this reason that the State Council issued "Several Opinions on Further Promoting the Healthy Development of the Capital Market" in 2014, encouraging listed companies to establish a market value management system. However, under the environment of lax legal supervision, different market understandings and unclear management boundaries, the so-called "market value management" at this stage has become a pretext for some people to manipulate stock prices by disclosing false information to make huge profits. It has deviated from the original intention of strategic management, and the practice of market manipulation in the name of market value management can be called "pseudo market value management".

The current illegal market manipulations under the cover of pseudo-market value management often involve manipulation of stock prices or insider trading. For example, listed companies and private equity funds jointly "hold up" and deliberately release bad news to lower the stock price, cooperate with private equity funds to covertly build positions, and then send good news to attract investors to buy, to push up the stock price, and then gradually sell the stocks; Another example is the financial giant Somebody mentioned above and the listed company signed a "deep cooperation" agreement, a stock sold for ten yuan, with the cooperation of the listed company's good news, etc. , can be pulled to fifty or sixty yuan, ignite the mood of retail investors and then ship, so as to make huge profits.

In recent years, the China Securities Regulatory Commission and the judiciary have successively disclosed a series of illegal private placements under the cover of market value management. These typical cases include:

01The case of "bull-market retail investors" colluding with major shareholders to manipulate the securities market

[According to the tenth anniversary press conference of Shanghai Financial Procuratorate]

At the beginning of 2015, the defendant and the actual controller of the listed S company Mr.He and others agreed with the defendants Mr.Huang  and Mr.Wen in order to sell all the equity they held in S company, and were recommended by Mr.Huang, Mr.Wen and Mr.Huang. The defendant, Mr.Jiang, acquired it at a premium in stages at a total price of not less than RMB 3.8 billion. Subsequently, Mr.He and Mr.Mai cooperated with Mr.Huang and Mr.Wen to control the S company to release favorable announcements such as "targeted additional issuance" and "high-send-transfer " to boost the stock price. Based on the above information advantages, Mr.Huang and Mr.Wen continuously bought and sold S company stocks in the secondary market through their own accounts or the accounts of others they controlled. The above five defendants made a total illegal profit of 5.285 billion yuan.

In December 2018, the Shanghai No. 1 Intermediate Court sentenced the five defendants to fixed-term imprisonment ranging from 8 years to 2 years, and fines ranging from RMB 500 million to 10 million. After the defendant appealed, the Shanghai Higher People's Court ruled in August 2020 to dismiss the appeal and uphold the original judgment.

02"Private First Brother" Xu's Manipulation of the Securities Market

[(2016) Lu 02 Xingchu No. 148]

The defendant, Mr. Xu, established a series of asset management companies including Shanghai Z Company from 2009 to 2015, and made securities investments through trust plans and partnership-type private equity funds. After 2010, Mr. Xu and others, in the name of "market value management", instigated the executives of listed companies that cooperate with them to control the rhythm and content of information disclosure, release good news at the right time, and introduce hot topics to build momentum; Company Z's products and the securities accounts it controls openly enter the top ten shareholders in the secondary market, privately increase, transfer by agreement, or continuously buy and sell through various forms of "Vest" competitive-price transactions, driving up the stock price. After the stock price rose, Mr. Xu used Z Company's products and its controlled securities account to take over the shares reduced by the above-mentioned company's shareholders in a bulk transaction, and then sold them in the secondary market, with a total illegal profit of 9.338 billion yuan.

In January 2017, the Qingdao Intermediate Court sentenced Mr. Xu to 5 years and 6 months in prison and a fine of 11 billion yuan for the crime of manipulating the securities market. The CSRC then took disciplinary action against Xu based on the criminal judgment, disqualified Xu and his affiliated companies, publicly condemned them, and added them to a blacklist.

03AS Information Company False Statement Case

[CSRC Administrative Penalty Decision (2016) No. 138] 

On April 30, 2014, Mr. Zheng, a staff member of A securities firm, informed AS Information that Mr. Gao said that the company's value was underestimated, and suggested that the company do a good job in market value management. From May 2014 to April 2015, AS Information repeatedly disclosed misleading and one-sided information in the process of receiving investors. From June 2014 to April 2015, according to the above-mentioned misleading information disclosed by the AS information, staff Mr.Pu and Mr.Zheng of A Securities Company used inducing language and exaggerating words without the approval and review of the internal control department of A Securities Company. He wrote emails with exaggerated language and text, and sent more than 11,000 emails to the personnel of many financial institutions. Therefore, some fund management companies bought a large number of "AS Information" from November 2014 to May 2015, and a total of more than 200 public funds held "AS information". There are up to more than 180,000 shares, accounting for nearly 75% of AS Information circulation shares. The share price of AS Information rose from about 28 yuan in April 2014 to 450 yuan in May 2015, an increase of nearly 16 times.

After the incident, the CSRC issued a warning and fined AS Information for misleading statements, and ordered Mr.Pu and Mr.Zheng to make corrections and fined them.

How to correctly grasp the legal boundary of market value management of listed companies? From the handling of the above cases by judicial authorities and regulatory authorities, it can be seen that securities companies and securities practitioners that issue private equity funds should strictly abide by the law. In particular, high-level personnel such as the actual controller should guide the company to understand the law and abide by the law, and establish compliance awareness from top to bottom: First, it is not allowed to control the rhythm of information disclosure, selective information disclosure, or false information disclosure. The second, no insider trading or manipulation of stock prices is allowed to seek illegal benefits. The third is to not damage the legitimate rights and interests of listed companies and small and medium investors.

By the end of 2021, the scale of domestic private equity securities funds has exceeded 6 trillion, accounting for a considerable proportion of the capital market, but more than 1,000 private equity funds have fallen below the traditional warning line, and the net value of fund products is less than 0.8 yuan. This indicates that the systemic risk of the industry is getting higher and higher. However,diligence and conscientiousness can not only rely on the expectations of professional ethics, but also require real regulatory intervention. Regardless of the risk tolerance of investors' funds, they should not be subject to subjective deception. Some unscrupulous private equity practitioners ‘drained all the ponds to fish’, and ultimately hurt the entire industry. The "demining" operation of the capital market has a long way to go.

 Finance is an industry with a high threshold, but it has been hyped by some Internet Big V to become an illusory myth that the majority of financial novices can enter the industry and become rich. With the demise of online financial big Vs such as Mr.Xu and Ye, it can be seen that the future trend of the private equity industry will be "certified employment". The Big Vs of the past need to enter formal fund companies and accept industry norms, otherwise they are likely to face the fate of being imprisoned.

Financial services need to create real value for the public, not by "Playing people for a sucker "(Deceiving)to make huge profits at the expense of ordinary people. "Little whites" who lack financial knowledge are driven by the Internet tide to enter the market with extremely high expectations. The big Vs cut a ‘knife ’fiercely, which is not in line with the purpose of common prosperity, and can only lead to anger and resentment in the end, causing instability to the society.