A 4.5 million fine exposes the chaos of "masked accumulation." Collusion between the actual controllers of listed companies and private equity firms to manipulate stock prices is also not an isolated case, often ending in losses.

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Cailianpress, April 4 (by reporter Feng Qijuan): The concerted-action relationship formed between some listed companies and private fund institutions has become a “high-risk combination” for evading regulation and carrying out illegal operations.

The Zhejiang Securities Regulatory Bureau recently disclosed that, for two types of illegal conduct—“failure to fulfill tender offer obligations as required” and “concealment of changes in shareholding information”—the Zhejiang bureau ordered Bessmei, a listed pesticide company, to make corrections, warned Chen Feng (the company’s former de facto controller at the time), and imposed a total fine of RMB 4.5 million.

The penalty notice states that, in order to evade regulation, Chen Feng borrowed other people’s accounts to secretly increase his holdings in Bessmei by 3%. This triggered the tender offer obligation but he did not fulfill it. At the same time, Chen Feng deliberately concealed changes in the shares held through the borrowed accounts, causing the listed company’s periodic reports to contain false records, which constituted violations in information disclosure. In addition, a key detail disclosed by the bureau is especially worth noting: before implementing the “masked increase in holdings,” Chen Feng had already formed a concerted-action relationship with private fund institutions such as Jiangsu Xihua. Through equity transfer arrangements, he raised the combined shareholding ratio of the concerted-action parties to 29.37%, bringing it close to the 30% tender offer red line.

But according to public information, Jiangsu Xihua is a private fund institution with questionable qualifications and weak internal controls. Its registered capital has only been paid in at 30%, it has only 1 full-time employee, and it has previously received a warning letter due to internal control issues.

Instead of choosing a private fund institution with better qualifications, why did Chen Feng form a concerted-action relationship with this “weak-qualification” private fund? Obviously, his purpose was not to seek professional investment institutions, nor was it primarily to do so—instead, it was to conceal his holdings and evade regulation.

Some private fund practitioners believe that when listed companies or related de facto controllers choose to cooperate with such private fund institutions, it mainly comes down to three considerations: first, the governance structure is simple, with few personnel, a short decision-making chain, making it easy for the party with actual control to be able to execute concerted action; second, internal controls are weak and compliance is relatively lax, providing room for noncompliant operations; third, such small private funds have low market attention, and shareholding changes are less likely to trigger immediate regulatory and market vigilance, becoming an “ideal mask” for hiding the true intention to hold shares.

In fact, such cases are not unique. Some listed company de facto controllers or shareholders tend to build a concealed concerted-action framework through private fund products, in order to conceal true shareholding, evade triggers for report/disclosure of stake increases and tender offer obligations, and even carry out pseudo market value management. Some private fund institutions with disordered governance and weak compliance, precisely because of traits such as operational flexibility and information opacity, have become a common channel for this kind of violation.

Form a pact with a “weak-qualification” private fund, and also execute a masked increase in holdings using borrowed accounts

In March of this year, Chen Feng had already received a notice of advance information on administrative penalties issued by the Zhejiang Securities Regulatory Bureau. The current penalty notice shows that, for failure to fulfill tender offer obligations as required, the Zhejiang Securities Regulatory Bureau ordered Chen Feng to make corrections, issued a warning, and imposed a fine of RMB 1.5 million; for conduct that concealed changes in shareholding information leading to false records in the listed company’s information disclosure, the bureau imposed a fine of RMB 3 million on Chen Feng.

As of August 2024, Chen Feng (the de facto controller), together with the company’s controlling shareholder Ningbo Bessmei Holding, the Qinghe 2 Fund under Jiangsu Xihua, and Shanghai Heqieqiyuan Enterprise Management Consulting Partnership (Limited Partnership), constitute a concerted-action relationship. Chen Feng and his concerted-action parties together hold 106 million shares of Bessmei, accounting for 29.37% of the listed company’s total share capital.

On August 30 of that year, Chen Feng bought 10.833 million shares of Bessmei, representing 3% of the listed company’s total share capital, by using personally borrowed funds through the securities accounts of Wu Mouming and Zhong Mouhai in bulk transactions. After the transaction was completed, Chen Feng and his concerted-action parties held 117 million shares of Bessmei, accounting for 32.37% of the listed company’s total share capital, triggering the tender offer obligation, yet Chen Feng did not fulfill the tender offer obligation as required.

In addition, Chen Feng concealed changes in shareholding information, resulting in false records in the de facto controller’s shareholding information disclosed in Bessmei’s 2024 annual report and 2025 semiannual report.

In October 2025, Bessmei announced that the de facto controller Chen Feng had received a filing notice from the CSRC. The notice pointed out that Chen Feng had admitted his wrongdoing and actively cooperated with rectification. He planned to transfer the Bessmei shares held on behalf of Zhong Mouhai and Wu Mouming through bulk transactions to non-related third parties. After the transfer of the shares, if there were any excess returns, they would be turned over to Bessmei to support the development and operation of the listed company. Before the rectification was completed, Chen Feng waived the voting rights corresponding to the shares held on behalf by the two aforementioned accounts.

Looking back, in December 2023, Bessmei announced that, due to the adjustment of the equity structure, de facto controller Chen Feng and Jiangsu Xihua signed the “Concerted Action Agreement.” At the same time, the company’s controlling shareholder Bessmei Holding, two other shareholders, and Chen Feng’s concerted-action party, Shanghai Heqieqiyuan Enterprise Management Consulting Partnership (Limited Partnership), collectively transferred 5.35% of the company’s shares to Jiangsu Xihua.

Before the transfer, Chen Feng and the concerted-action parties directly and indirectly held 28.45% of Bessmei’s equity; after the transfer, they together held 29.37% equity. In addition, de facto controller Chen Feng and his concerted-action parties voluntarily committed that within 18 months after the transaction was completed, they would not reduce the shares held or the shares of the company held.

According to disclosures by the Asset Management Association of China, Jiangsu Xihua is a securities-type private fund established in September 2015. It completed registration in December of the same year, with registered capital of RMB 10 million, but the paid-in proportion is only 30%. Its assets under management are RMB 0–5 billion. It is noteworthy that among the full-time employees of Jiangsu Xihua registered with the Asset Management Association of China, there is only 1 person, and the last update time for the institution’s information was March 2024.

According to Tianyancha, in July 2022, Jiangsu Xihua was listed in the 3-year business abnormality list by the Nanjing Jianye District Market Supervision Administration for failing to submit annual report information as required.

In August 2025, due to failure to properly preserve records related to private fund investment decisions, transactions, and so on, Jiangsu Xihua received a warning letter from the Jiangsu Securities Regulatory Bureau.

Conceal the concerted-action relationship with the private fund, and face heavy fines

“Masked increase in holdings” usually refers to secretly accumulating shares of a listed company through methods such as dispersing accounts, concealing concerted-action parties, and shareholding held on behalf of others, intentionally failing to perform statutory disclosure and takeover/purchase obligations, and hiding the true shareholding entities and their proportions.

In practice, cases in which listed company de facto controllers or shareholders reach concerted-action arrangements with private funds are by no means rare, and there are also quite a few cases attempting to conceal such concerted-action relationships. Behind this, complex motives are often hidden, such as evading regulation, manipulating stock prices, concealing control, and conducting pseudo market value management.

In July 2025, regarding the major omission in information disclosure of Haili Technology (rights protection) caused by Kang Wei and Tang Qiqing concealing the concerted-action relationship, the CSRC ordered them to make corrections, issued a warning, and imposed a fine of RMB 4 million. Kang Wei and Tang Qiqing respectively bore RMB 2.5 million and RMB 1.5 million.

In 2020, Kang Wei, through his de facto controller entity and shareholding held on behalf of others, cumulatively acquired 29.91% of Haili Technology’s shares. From March 2021 to May 2021, Tang Qiqing agreed to acquire 29.99% equity interest in Haili Technology by cash and assuming debts. Subsequently, Haili Technology announced that Tang Qiqing was the listed company’s sole de facto controller.

But after investigation, Kang Wei and Tang Qiqing were concerted-action parties in acquiring 29.99% of Haili Technology. Among the acquired shares, only 5.47% of the equity was purchased using Tang Qiqing’s own funds; the remaining 24.52% was obtained through taking over debts of the original de facto controller of Haili Technology. The main source of funds for Tang Qiqing to repay the debts came from the enterprises controlled by Kang Wei. As an undisclosed concerted-action party, Kang Wei deeply participated in the business operation and management of Haili Technology, repeatedly leading and participating in major matters such as nominating and selecting senior executives and determining their compensation and benefits, capital operations, dividends, bonus shares, and so on.

Based on information from multiple parties, the Kang Wei involved in this case who was punished is the founder of the domestic early-stage “sunshine” private fund institution HeXi Investment and also the founder of Xi Investment. Before establishing the private fund, Kang Wei previously served as a research analyst in the Shanghai R&D department of Sinotrans Trust, general manager of the securities research institute of Shenwan Hongyuan Securities, vice president of China Shipping Trust, general manager of Haili Fund, and also general manager of Sinotrans Trust (as stated in the original text). On the website of the private fund, Kang Wei’s resume previously indicated that it said “the general manager of the domestic youngest fund company and trust company.”

As early as 2018, the CSRC issued warnings to HeXi Investment and Kang Wei for “unreported shareholding beyond the prescribed proportion” and “trading securities within the restricted transfer period.” They were jointly fined a total of RMB 1,810 million.

Although HeXi Investment denied and submitted its defense, the CSRC still determined that HeXi Investment, together with China CITIC Securities, Ping An Securities, and Gu Guoping, constituted concerted-action parties. The CSRC stated that HeXi Investment raised funds in multiple forms totaling more than RMB 1.8 billion and traded Huitong Technology through multiple private fund products under its umbrella, and that the related transaction decisions were all made by HeXi Investment. After the shareholding proportion in the account group reached the 5% reporting/tender triggering line, HeXi Investment did not fulfill reporting, notification, and announcement obligations, and continued to trade this stock during the restricted transfer period.

In addition to de facto controllers, there are also cases where listed company shareholders conceal their concerted-action relationship with private funds and are punished. In February this year, the Jiangsu Securities Regulatory Bureau disclosed that for the major shareholders of Sujiao Ke holding more than 5% of shares, Wang Junhua and Fu Guanhua, both had violations involving concealment of concerted-action relationships and failure to disclose in a timely manner. They were issued warning letters and their names were recorded in integrity files, and the Shenzhen Stock Exchange also issued a regulatory letter.

After investigation, Wang Junhua’s spouse, as the sole beneficial holder, established three asset management plans and private fund products in succession, with Wang Junhua actually controlling these three products and thereby constituting concerted-action relationships with them. Fu Guanhua’s spouse, as the sole beneficial holder, established one private fund product, with Fu Guanhua actually controlling this one product and thereby constituting a concerted-action relationship with it.

The earliest traceable concerted-action relationship above dates back to December 2021. Wang Junhua and Fu Guanhua both failed to notify the company in a timely manner for disclosure, resulting in the company only disclosing it as late as its 2024 semiannual report, with an information disclosure lag of 1 to 2.5 years.

Conspire with private funds to manipulate stock prices—hard to escape losses and heavy penalties

If concealing concerted-action relationships is meant to hide control and evade regulatory constraints, then some so-called “cooperation” between listed company de facto controllers or shareholders and private funds has even evolved into direct conspiratorial stock-price manipulation. Despite “every scheme being exhausted,” these cases mostly end with massive losses and severe regulatory penalties.

In January 2024, the CSRC imposed a total fine of RMB 8 million on the case involving manipulation of Meishang Ecology stock by Wang Yingyan, chairman of the board of Meishang Ecology, and Ji Yun, the de facto controller of Yongshu Asset. Wang Yingyan and Ji Yun respectively bore RMB 5 million and RMB 3 million in fines.

According to investigation, Wang Yingyan and Ji Yun controlled 113 securities accounts and manipulated the stock price of Meishang Ecology through continuous trading and matched trading. Ultimately, the account group incurred losses of RMB 238 million. During the manipulation, Wang Yingyan was the initiator and decision-maker, arranged trading margin, and handled the borrowing work for some accounts; Ji Yun handled the borrowing work for other accounts.

Yongshu Asset had already been revoked in May 2020. The company’s disclosed business scope includes: asset management, investment management, industrial investment, and venture investment, but no registration record remained with the Asset Management Association of China.

Cases of listed company de facto controllers conspiring with private funds to manipulate stock prices are not one-off, and they often end in losses.

In March 2016, regarding the case of conspiring to manipulate Hongda New Materials’ stock price, the CSRC imposed a fine of RMB 3 million on Zhu Dehong, the then de facto controller of Hongda New Materials; imposed a fine of RMB 3 million on Shanghai Yongbang Investment; and issued warnings and imposed fines of RMB 0.6 million and RMB 0.1 million, respectively, on Yang Shaodong, the then chairman and de facto controller of Shanghai Yongbang Investment, and on Feng Yuefeng, the investment director.

The CSRC stated that Shanghai Yongbang’s main business was investing in the secondary market and also helping listed company shareholders carry out “market value management.” Shanghai Yongbang borrowed 45 securities accounts and used 11 structured trust products and broker profit swap products, such as “Qianshi Capital—Haitong MOM Private Fund Select—Yongbang 2,” among others. It actually controlled and used the above 56 accounts (hereinafter referred to as the account group) to manipulate stocks such as Hongda New Materials.

Zhu Dehong and Shanghai Yongbang conspired by taking advantage of information advantages to continuously buy and sell and to trade between accounts under their actual control, affecting the trading prices of Hongda New Materials. However, the account group’s trading of Hongda New Materials ultimately resulted in losses of RMB 30.6668 million.

In addition, according to disclosures by the Asset Management Association of China, Shanghai Yongbang Investment was established in November 2007 and was deregistered by the association in March 2017.

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