Strict Measures to Severely Punish Listed Companies for Hyping Concepts and Riding Hot Topics

Securities Times Reporter Cheng Dan

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

The China Securities Regulatory Commission (CSRC) has a clear and firm stance: any behavior that harms investors’ interests by speculating on concepts or riding hot topics will be investigated and dealt with swiftly and severely, with no leniency. Notably, the CSRC is accelerating its crackdown on hot-topic speculation, 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 also 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 hot topics still persists. Some “key minorities” knowingly continue their misconduct despite knowing it is wrong. The core issue lies in the imbalance between the costs and benefits of illegal activities in China’s capital markets; administrative penalties alone are insufficient to serve as an effective deterrent.

Legally, the misconduct of listed companies riding hot topics is often classified as “misleading statements,” which fall under information disclosure violations. Criminal accountability mainly relies on Article 161 of the Criminal Law, which addresses “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 charges in practice. 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 prosecution be triggered, 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 cases remaining at the administrative penalty stage, with few advancing to criminal proceedings.

In mature capital markets, false statements and concept speculation are classified as securities fraud, with criminal accountability normalized. For example, in the U.S. market, besides substantial civil damages, responsible individuals can face up to 25 years in prison. 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 hot topics, under charges of securities fraud and insider trading. The severity of such punishments deters market participants significantly.

Faced with enormous profit incentives, low costs of illegal activities encourage 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 hot topics be increased. This approach is essential to fundamentally eliminate market chaos and effectively safeguard market order and the legitimate rights and interests of small and medium investors.