Taihe · Listed Company Securities Compliance Column | Key Regulatory Points on Shareholder Share Purchases by Listed Companies
Release Date:
2026-07-24
The high-quality development of the capital market hinges on the compliance foundation of listed companies. As the registration-based system is fully implemented and regulatory frameworks are iteratively refined, securities compliance has become a central pillar for the stable operation of listed firms. Accurately aligning with regulatory guidance and fortifying compliance safeguards are critical enablers for companies to navigate market cycles.
To this end, we have established this dedicated column, focusing on the core areas of securities compliance for listed companies: summarizing the key points of new regulatory rules, deconstructing the rationale behind typical enforcement actions, dissecting the essence of court rulings, and thoroughly examining the practical challenges of compliance. Adopting a legal‑professional perspective, we employ clear, pragmatic language and scenario‑based analysis to interpret compliance requirements, map out risk pathways, and provide actionable guidance, helping companies strengthen their internal control systems, mitigate compliance risks, and enhance the effectiveness of their compliance management.
When compliance thrives, enterprises thrive; when compliance is stable, development is stable. We hope this column will serve as a trusted partner for listed companies—helping them discern regulatory trends, address compliance challenges, mitigate compliance risks, and strengthen the foundations of sustainable growth—so that together we can foster the sound and healthy development of the capital market.
Recently, numerous listed companies have issued announcements on share increases and buybacks. Moreover, controlling shareholders and senior executives of some firms have personally invested their own funds to boost their holdings, aiming to convey confidence in the company’s prospects and stabilize stock prices in the secondary market. However, as such share‑increase activities have become more frequent, securities regulators and stock exchanges across the country have stepped up enforcement, cracking down on a range of violations related to these transactions. Drawing on the latest regulatory cases, this article outlines typical instances of improper share‑increase practices, providing guidance for controlling shareholders, actual controllers, and directors and senior management to conduct self‑assessments.
I. Main Types of Violations in Shareholder Share Purchases
1. “Bullshit” share increases by parties lacking the capacity to fulfill their commitments
The share‑increase plan constitutes a public commitment; arbitrary announcements or failure to fulfill the commitment upon maturity will directly trigger regulatory accountability.
Case 1: Yuan, then a director and president of JLT, and Luo, general manager of a controlled subsidiary, publicly pledged to increase their holdings by no less than RMB 300 million within six months. However, during the commitment period, they not only failed to actively raise the necessary funds but, when confronted with inquiries from the stock exchange, even fabricated “fictitious” deposit certificates using bridge financing. Ultimately, the Shanghai Financial Court determined that their conduct constituted false statements in securities matters and ordered the two executives to jointly compensate investors for losses totaling nearly RMB 800,000.
Case 2: The actual controller of STYY pledged to increase its holdings by RMB 2.5 million to RMB 5 million, but ultimately only executed RMB 79,500, resulting in an execution rate of 3.18% and drawing public censure from the stock exchange.
2. Reaching 5% without ceasing, and reaching 1% without timely disclosure.
Once a shareholder or a group of persons acting in concert increases their holdings to reach 5%, they must immediately suspend trading and, within three days, file a report and make a public announcement. If the threshold is reached again at the 1% level, a disclosure must be made the following day. This is an information‑disclosure obligation that is often overlooked during share‑acquisition activities.
Case 1: CCRS increased its stake in Xintian Lvneng, with its shareholding exceeding 5%; trading was not suspended on the day, and the Hebei Securities Regulatory Bureau issued a warning letter.
Case 2: During November 2015, GDXJZ, through its private‑placement products and trust schemes, successively acquired stakes in four stocks, including “Keheng Shares” and “Dadonghai A.” Upon reaching the 5% threshold for shareholding in these securities, it failed to cease further purchases as required by law and to fulfill its reporting and disclosure obligations. The total amount of illegal additional acquisitions amounted to RMB 37.66 million, ultimately resulting in a warning letter issued by the Guangdong Securities Regulatory Bureau.
3. Concealing a concerted action relationship to “increase holdings in disguise,” thereby evading the obligations to make a public shareholding disclosure and an offer.
By splitting share acquisitions across relatives, affiliated private equity funds, and third-party accounts, and by concealing concerted‑action relationships, such practices are used to evade the obligations to disclose a 5% stake and to make a mandatory tender offer upon reaching 30%, and have become key targets of regulatory enforcement in recent years.
Case 1: To evade his obligation to make a mandatory tender offer, the actual controller of BSM, Mr. Chen, used other persons’ accounts to hold and increase his shareholding by 3%, while deliberately concealing his concerted‑action relationship with the private‑equity firm Jiangsu Xihua. This resulted in false statements in the listed company’s annual report. Ultimately, Mr. Chen was fined a total of RMB 4.5 million by the Zhejiang Securities Regulatory Bureau for failing to fulfill his tender‑offer obligations and for violations of information‑disclosure requirements.
Case 2: For 14 years, ESDS’s controlling shareholder, the Cashmere Group, and its concert parties—including three Hong Kong‑based companies funded by employees and financed through the Group—secretly increased their holdings of B shares while deliberately concealing their concerted‑action relationship. As a result, even after their shareholding exceeded 30%, they repeatedly failed to fulfill their obligations to disclose changes in equity interests or to make a mandatory tender offer. Ultimately, the Inner Mongolia Securities Regulatory Bureau issued them a warning letter, and the Shanghai Stock Exchange publicly censured them.
4. Violations of the blackout period for regular reports and material events involving additional share purchases
Directors and senior executives of listed companies are prohibited from purchasing shares within 15 days prior to the disclosure of annual or interim reports, within 5 days prior to the release of quarterly reports, earnings forecasts, or preliminary earnings announcements, and during periods of material‑event sensitivity; any share purchases made during such sensitive periods may be subject to scrutiny as potential insider trading.
Case 1: DLSY’s directors engaged in substantial share purchases during the annual report filing period, prompting the exchange to issue a regulatory warning and require them to remit the resulting price‑difference gains.
Case 2: During the sensitive period for Q1 reports, YQHB’s senior management engaged in share purchases, and, compounded by their failure to fulfill a prior commitment to increase holdings, they have been found to have committed two violations. As a result, the Hunan Securities Regulatory Bureau has ordered them to submit a rectification report within a specified timeframe.
5. Share buybacks trigger short-term trading
If a major shareholder or a director/executive increases their holdings and then sells within six months, or if they sold within six months prior to the increase, such transactions shall be deemed short-term trading—regardless of the account involved—and all proceeds from these trades must be remitted in full to the company.
Case 1: Zhou, the former chairman of LKKJ, purchased LKKJ shares through his personal stock account and then sold them within six months via a stock account he controlled. The Shenzhen Securities Regulatory Bureau issued a warning to Zhou and imposed a fine of RMB 800,000.
Case 2: Within six months of making a shareholding disclosure, shareholder Ye sold shares, and in addition to this, the disclosure itself was non-compliant. As a result, the Jiangsu Securities Regulatory Bureau issued a warning to Ye, confiscated the illegal gains, and imposed a fine of RMB 700,000.
Shareholder share purchases are a constructive means of bolstering market confidence and stabilizing a company’s stock price, but the entire process must strictly adhere to regulatory requirements. Practices such as deceptive share‑buying campaigns, violations of disclosure obligations, concealment of concerted‑action relationships, trading during blackout periods, and short‑term trading all fall within the scope of priority regulatory enforcement and may result in self‑disciplinary sanctions and administrative penalties. For controlling shareholders, actual controllers, and directors and senior executives, share purchases not only signal confidence but also entail compliance‑based responsibilities. Only by fulfilling commitments in accordance with the rules and conducting operations in a compliant manner can they genuinely convey positive value and safeguard trust in the capital markets.
(This article reflects the author’s personal views and is intended solely for informational purposes; it does not constitute legal advice or an interpretation of the law by Taihe Law Firm. This disclaimer is hereby made.)
This article is published by Jiangsu Taihe Law Firm. The author is Jiangsu Taihe Law Firm, and the copyright belongs to the author. Please cite the original source when reprinting; violations will be prosecuted.
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