(Yicai) May 26 -- China has penalized five employees of Changan Automobile and Huawei Technologies to the tune of CNY16.7 million (USD2.5 million), consisting of fines and confiscated illicit gains, for insider trading in relation to a cooperation agreement the pair signed in 2023.

During the two and a half months before the memorandum of understanding on investment cooperation was inked, the five bought CNY61 million (USD9 million) of Changan Auto’s shares, ultimately making a profit of more than CNY4 million (USD589,000), the China Securities Investor Services Center announced on May 22.

After Changan Auto unveiled a deal with a well-known technology company -- later confirmed to be Huawei -- on Nov. 26, 2023, its stock price soared by the 10 percent exchange-imposed daily trading limit for two consecutive days. The stock had been rising since Nov. 23 because of speculation around the partnership.

The first of the five to move, who bought Changan Auto’s shares between Oct. 13 and Nov. 6 and made a profit of CNY2.1 million, was punished with forfeiture plus a combined CNY12.6 million in fines. A husband-and-wife pair, who acquired shares from Nov. 6 to 14 and profited CNY1 million, were subject to confiscation and fines of nearly CNY4.1 million. The other two were fined CNY1.5 million and CNY1.6 million, respectively.

The case exposed clear lapses in Changan Auto’s management of insider information, including weak confidentiality controls over major matters, which allowed the information to spread online before the official announcement, the ISC noted.

Changan Auto’s shares [SHE: 000625] closed down 1 percent at CNY8.30 (USD1.22) each in Shenzhen today. In November 2023, they reached a high of CNY21.14 (USD3.11).

A total of 218 insider trading cases were unearthed last year, up 22 percent from 2024, according to data from the China Securities Regulatory Commission. Moreover, there were 85 market manipulation cases, a 20 percent rise. Regulators said that the increase in the number of cases is mainly due to enhanced big data monitoring capabilities rather than an actual rise in violations.

Editor: Futura Costaglione